HSBC sees UK business weaken amid Brexit uncertainty

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Banking giant HSBC has reported tougher conditions in the UK in the run-up to Brexit as it revealed lower than expected annual results amid a cocktail of global uncertainties.

The lender said it saw “some softening” in its British business in January with customers cautious given the “prolonged uncertainty” over the departure from the EU.

It also pointed to a “challenging” global environment in the last quarter of 2018 amid US-China trade tensions.

Pre-tax profits for the year rose 16% to $19.9bn though that was short of expectations for $22bn. Shares were 4% lower by the close.

Chairman Mark Tucker said the bank’s current financial targets remained appropriate “even as the global economic outlook becomes less predictable”.

He added: “Many of our UK customers are understandably cautious about the immediate future, given the prolonged uncertainty surrounding the UK’s exit from the European Union.”

Chief executive John Flint said “expected credit losses” – the amount the bank sets aside for loans going bad – were higher in 2018 “reflecting the uncertain economic outlook in the UK and heightened downside risks”.

He added that the bank continued to make preparations for Brexit, with its French division giving it a “major advantage” during the process.

“Our immediate priority is to help our customers manage the present uncertainty,” Mr Flint added.

The bank, which is increasingly focused on Asia – where it already makes most of its profits – faces a challenge as the region’s dominant economy China “remains subject to domestic and external pressures”.

But HSBC said the fundamentals for growth in Asia remained strong “in spite of a softer regional outlook”.

Mr Flint said: “Clearly our customers are really more cautious and are more thoughtful around this trade war with the US.

“It’s possible that we’ll see slightly lower growth rate this year but we are still going to see a growth rate.”

On Brexit, he said: “The longer we have the uncertainty the worse it’s going to be for the customers.

“Customers are absolutely postponing investment decisions… and that’s been the part of this slowdown that we have seen in the UK.”

HSBC’s comments follow a warning from state-backed Royal Bank of Scotland last week about the impact of Brexit on its business.

(c) Sky News 2019: HSBC sees UK business weaken amid Brexit uncertainty

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