HSBC Q1 2020 reported profit before tax is down by 48% year-over-year to $3.2bn for the quarter to end March.

The first quarter earnings are materially impacted by higher than expected credit losses, other credit impairments and weakening oil prices.

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In particular, HSBC is taking a $3bn charge in the first quarter. Moreover, HSBC warns it may have to set aside up to $11bn to cover impairments for the full fiscal.

By contrast, in the year ago quarter HSBC set aside a mere $600m.

Reported revenue is down by 5% for the quarter. This results from adverse market impacts in life insurance manufacturing and adverse valuation adjustments in Global Banking and Markets.

On the other hand, HSBC posts a resilient revenue performance, notably in Asia, Global Markets, Retail Banking and private banking.

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But ongoing margin pressure results in the net interest margin inching down by 2 basis points quarter-over-quarter to 1.54%. Furthermore, the NIM is down by 5 basis points y-o-y.

HSBC Q1 2020 positive metrics

During the quarter, lending increased by $41bn and deposits grew by $47bn on a constant currency basis. Deposit balances also reflect continued growth in Retail Banking and Wealth Management.

Other highlights include reported operating expenses down 5%. Meantime, adjusted operating expenses are down 3%, despite continued investment.

Noel Quinn, Group CEO says: “The economic impact of the Covid-19 pandemic on our customers has been the main driver of the change in our financial performance since the turn of the year.” Looking ahead, Quinn says that loan provisions could soar to between $7bn and $11bn for the full year.

In the UK, HSBC first quarter provisions amount to $589m, mainly for potentially soured credit card and mortgage accounts. In addition, HSBC is pausing its plans to cut jobs this year from 235,000 to 200,000 as a result of the pandemic.