HSBC reports first quarter 2020 earnings amid coronavirus pandemic

HSBC, Europe’s largest bank, is expected to release its first-quarter financial report card today — and some investors said they’re anticipating a “dramatic” fall in earnings due to the coronavirus pandemic.

The London-headquartered bank derives the bulk of its earnings from Asia, particularly Greater China where the coronavirus hit first. The bank had warned in February that disruptions caused by the virus outbreak could reduce its revenue this year — but some investors said economic conditions have turned out to be worse than expected.

Dickie Wong, executive director at Kingston Securities, said on Tuesday that HSBC is expected to post “a dramatic drop” in earnings and revenue.

“The first-quarter earnings will drop as much as 50{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f},” he told CNBC’s “Squawk Box Asia.”

Analysts at Morgan Stanley also projected a big decline in several financial metrics at HSBC. The analysts last week outlined what they’re expecting in the earnings report:

• Profit before tax to fall by 35.7{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} year-over-year to $3.998 billion
• Operating expenses to dip 0.4{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} from a year ago
• Earnings per share to come in 35.3{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} lower than the first quarter of 2019

Morgan Stanley holds an “underweight” stance on HSBC, according to its report.

“HSBC has among the strongest balance sheets in Europe and Asia. Yet we expect revenues to come under pressure as the interest rate outlook changes and geopolitical risks are heightened,” the analysts wrote.

The bank’s stocks were hammered in both London and Hong Kong after it scrapped dividend payouts for the whole of 2020. Many investors favor banks such as HSBC for the steady dividends, but British regulators urged commercial lenders to preserve capital.

HSBC shares in London have fallen by 29.7{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} so far this year, while its Hong Kong-listed shares have dropped by around 35.1{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} in the same period.