The British Bank is suffering from the long-lasting effects of the Covid-19 pandemic while geo-political risks pertaining to US-China relations and Brexit remain a top concern.

The group’s reported profit after tax is down 62% to US$5.2 billion from the third quarter of 2019, due to higher expected credit losses (ECL) and lower revenues of US$38.7 billion, a nine percent drop from the previous year.

Reported operating expenses decreased by one percent and adjusted operating expenses have dropped by three percent, driven by the impact of the bank’s cost-saving initiatives, reduced discretionary expenditure and a lower performance-related pay accrual.

ECL is lower by US$0.1 billion to US$0.8 billion, reflecting a stabilisation of the forward economic outlook from 2Q20, while wholesale stage 3 charges were offset by increased releases related to historical default cases.

US

The UK bank has issued over 900 structured products worth US$2.7 billion year-to-date of which 273 structures valued at US$936.4m were marketed in Q3 20 –  there is no growth in issuance year-on-year but a 13.8% increase in sales (Q3 19: 273 products /US$822.8m).

SRP data shows that HSBC has 3,965 live structured products in the US market. The tranche investments are wrapped as CDs (1,154/US$2.9 billion), registered unlisted notes (2,809/US$10.6 billion), exchange-traded notes (1/US$26.97m), and unregistered notes (1/US$5m).

Some underlyings include the S&P500 (1,419/US$5.2 billion), Russell 2000 (831/US$1,77 billion), Eurostoxx 50 (690/US$3 billion), DJ Industrial Average Index (393/US$1.12 billion), and the HSBC Vantage5 ER Index (323/ US$468m).

Despite the increase in structured products sales, the bank reported a loss of US$165m in profits before tax for the third quarter of 2020, a significant plummet from its figure of US$97m in Q2 20 and US$104m in Q3 19.

Risk-weighted assets stand at US$90.1 billion compared with US$97.3 billion in Q2 20 and US$97.8 billion in Q3 19.

Net interest income is valued at US$453m, down from Q2 20’s US$502m and Q3 19’s US$482m while net fee income has remained somewhat steady at US$300m.

Asia

In the Asia Pacific region, the UK bank has seen its market share in the structured products market grow by 41.3%. SRP data shows that HSBC has roughly 2,500 live structured products in the Asia Pacific database which fall under multiple asset classes such as equities, commodities, hybrids and real estate.

Popular underlyings include Tencent Holdings, ChinaAMC CSI 300 Index ETF (HKD), Alibaba, Hang Seng Index, Meituan Dianping, and Hong Kong Exchanges and Clearing.

Net interest income in Asia was US$3.26 billion for Q3 20 reflecting a slight decrease from US$3.7 billion in Q2 20 and US$4.2 billion in Q3 19.

Reported profits before tax stand at US$3.1 billion compared with US$3.6 billion and US$4.7 billion in Q2 20 and Q3 19, respectively.

Total RWAs stand at US$385 billion, down from US$374 billion in the previous quarter and US$364 billion in Q3 19.

Europe

In Europe, the bank has seen its activity falling year-on-year with a drop in issuance (Q3 20: 10,859 products v Q3 19: 12,961 products) and sales (Q3 20: US$96.5m v Q3 19: US$210.8m).

HSBC has 350,712 live structured products in the SRP database listed in the European market. The tranche investments are tied to almost 600 underlyings, some of which include DAX, government bonds, Gold, EUR/USD, Brent Crude Oil, Silver, and WTI Crude Oil.

Despite limited activity in the structured products retail market HSBC has bounced back from a disastrous second quarter with profit standing at US$84m compared to US$2.5 billion in Q2 20 and US$423 billion in Q3 19.

Total external assets value US$1.3 trillion as of September 2020, compared with US$1.26 trillion in 2Q20 and US$1.2 trillion as of September 2019.

RWAs stand at US$281 billion reflecting an increase from US$2Q20’s 278 billion and a decrease from 3Q19’s US$294 billion.

Click here to view HSBC’s 3Q 20 earnings.