HSBC profits hammered by pandemic and soaring US-China tensions

HSBC makes 90 percent of its profit in Asia, with China and Hong Kong being the major drivers of growth. (AFP)
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Updated 03 August 2020

HSBC profits hammered by pandemic and soaring US-China tensions

  • Bank reports post-tax profit of $3.1 billion while pre-tax profit was $4.3 billion
  • Asia-focused lender embarked on a huge cost-cutting initiative at the start of the year

HONG KONG: HSBC said Monday profits for the first half of 2020 plunged by 69 percent on year as the banking giant was hammered by the coronavirus pandemic and spiraling China-US tensions.
The lender reported post-tax profit of $3.1 billion while pre-tax profit was $4.3 billion, a 64 percent drop on the same period last year. Reported revenue was down nine percent at $26.7 billion.
The figures missed analyst forecasts and the bank also raised its estimate for 2020 loan losses from $8 billion to $13 billion.
Chief executive Noel Quinn described the first six months of the year as “some of the most challenging in living memory.”
“Our first-half performance was impacted by the COVID-19 pandemic, falling interest rates, increased geopolitical risk and heightened levels of market volatility,” he said in a statement to the Hong Kong stock exchange.
Even by the standards of the current economic maelstrom engulfing global banks, HSBC has had a torrid time.
Before the coronavirus crisis it was beset by disappointing profit growth, ground down by US-China trade war uncertainties and Britain’s departure from the European Union.
The Asia-focused lender embarked on a huge cost-cutting initiative at the start of the year, including plans to slash about 35,000 jobs as well as trimming fat from less profitable divisions, primarily in the United States and Europe.
The coronavirus upended some of that cost-cutting drive with banks hammered by market volatility and the economic slowdown caused by the pandemic.
But HSBC has a further headache — geopolitical tensions via its status as a major business conduit between China and the West.
HSBC makes 90 percent of its profit in Asia, with China and Hong Kong being the major drivers of growth.
As a result, it has found itself more vulnerable than most to the crossfire caused by the increasingly bellicose relationship between Beijing and Washington.
The bank has tried to stay in Beijing’s good graces.
It vocally backed a draconian national security law that Beijing imposed on Hong Kong in June to end a year of unrest and pro-democracy protests.
The move sparked criticism in Washington and London but analysts saw it as an attempt to protect its access to China, which has a track record of punishing businesses that do not toe Beijing’s line.
But that has not shielded it from Beijing’s wrath.
Last month the bank was a subject of multiple reports in China’s state-run media claiming that it had helped to provide the evidence that led to the arrest in Canada of Huawei executive Meng Wanzhou on a US arrest warrant.
HSBC released a statement on its Chinese Weibo accounts saying it had not “framed” telecom giant Huawei or “fabricated evidence” that led to the arrest of Meng.
China’s Internet censors blocked access to HSBC’s statement within hours of publication, without offering an explanation.
Quinn referenced the bank’s growing political vulnerability in Monday’s statement.
“Current tensions between China and the US inevitably create challenging situations for an organization with HSBC’s footprint,” he said.
“However, the need for a bank capable of bridging the economies of East and West is acute, and we are well placed to fulfil this role,” he added.
The bank’s Asia operations continued to show “good resilience,” Quinn said, with profit before tax of $7.4 billion.
Earlier this year Quinn put some of the job cuts on hold as the pandemic struck.
But in Monday’s statement he vowed to press ahead with the cost-cutting.
“As we seek to accelerate our transformation in the second half of the year, I am mindful of the impact it will have for some of our people, particularly those leaving us,” he said.

Experts warn businesses in Saudi Arabia to ramp up their cybersecurity

Updated 19 min 37 sec ago

Experts warn businesses in Saudi Arabia to ramp up their cybersecurity

  • From hackers demanding ransoms to email viruses, Saudi executives should act to protect their businesses from attack

RIYADH: As Saudi companies become more technologically advanced, cybersecurity experts have warned of a general lack of awareness about industry best practices and are worried that businesses are not adequately protecting their systems.

A survey commissioned earlier this year by cybersecurity firm Tenable found that 95 percent of businesses in the Kingdom last year were the victim of a cyberattack.

In addition, 85 percent of Saudi respondents said that they had witnessed a dramatic increase in the number of attacks over the past two years. Companies said they had suffered loss of customer or employee data, ransomware payment demands and financial loss or theft.

Cybersecurity Ventures, a US-based researcher and publisher in this sector, estimated that the global cost of cybercrime could reach $10.5 trillion by 2025.

The rising number of cases, combined with the huge financial impact, will hopefully spur Saudi business executives into action, said Dr. Muhammad Khurram Khan, professor of cybersecurity at King Saud University and founder and CEO of the Global Foundation for Cyber Studies and Research.

“This huge and lucrative price tag entices hackers and cybercriminals to innovate their hacking tactics against individuals and organizations. The ignorance of cybersecurity measures and lack of awareness are the two fundamental loopholes that enable hackers to compromise sensitive data and perform financial fraud,” Khan told Arab News.

Cybersecurity risks can take many shapes and forms, from phishing (impersonating a legitimate organization to access sensitive personal information) to malware (malicious software created to cause damage to a computer or server). Types of malware include viruses, ransomware or spyware, while hacking takes place when outsiders gain unauthorized access to a computer from a distance by exploiting weaknesses in a computer’s defenses.

All of these are serious issues, and the region’s experts have urged computer users to become more cautious about their online security.

Mimecast, an international company specializing in cloud-based email management, highlighted the dangers of phishing. 

“Scams are becoming increasingly difficult to identify, so the average user might not be able to spot fake messages if they haven’t had the necessary cybersecurity awareness training,” said Maen Ftouni, country manager for Mimecast, Saudi Arabia.

Mimecast’s State of Email Security 2020 report states that 74 percent of organizations in Saudi Arabia are concerned about a web domain, brand exploitation or site spoofing attack. The report also found that 48 percent of organizations had seen an increase in phishing over the past 12 months.

“Phishing scams are everywhere, and individuals need to be constantly alert and on the lookout for malicious emails and text messages to avoid falling victim to these increasingly sophisticated attacks. Your bank will never ask you to update information via a link, so if you receive a message like this, alarm bells should be ringing,” Ftouni said.

Another threat is the growing incidences of ransomware, a type of malware that allows hackers to block access to a victim’s data, or in some cases to publish it, unless a ransom is paid. For many companies this could be their worst nightmare as sensitive data is placed in the public domain.

Veritas Technologies, an international data management and protection company, stated in its annual ransomware resiliency report that only 36 percent of respondents said that their security had kept pace with their IT complexity (43 and 39 percent in the UAE and Saudi Arabia, respectively).

According to Veritas, some businesses that fall victim to ransomware and are not able to restore their data from a backup copy of their files may look to pay the hackers to return their information. Its research showed that companies with greater complexity in their multi-cloud infrastructure were more likely to make these payments.

Johnny Karam, vice president of emerging markets at Veritas, said that cloud technology was offering some solutions, but he warned that Saudi business owners should not get too comfortable just yet.

“Whilst this is positive news, our research shows that there is still more that needs to be done. For instance, 29 percent of businesses’ data protection strategies in KSA aren’t keeping pace with the levels of complexity that they’re introducing. As a result, the majority of businesses are feeling the impact of ransomware more acutely,” Karam said.

Businesses of all sizes should be concerned about their security, said Saudi cybersecurity expert, Abdullah Al-Jaber, and small-scale entrepreneurs should not assume it is a problem only for big corporations.

“Even small businesses such as local shops are getting hit and losing their data due to their lack of cybersecurity protections. Large organizations are getting more mature and protecting their systems, and attackers are moving to small- and medium-sized organizations where they lack security awareness and controls. Even individuals can be subject to targeting,” he warned.

Al-Jaber applauds the new government improvements being implemented by the National Cybersecurity Authority (NCA) and the new Saudi Cybersecurity strategy, and recommends that those concerned brush up on their cybersecurity protocols to ensure that they are being protected.

“Having backups, applying the system updates regularly and making sure the systems are not exposed to the Internet, as well as using complex passwords and enabling two-factor authentication, will reduce the risks significantly,” he said.

So, no matter what size a company is or what sector it is involved in, good cybersecurity and data protection are priorities that no business should ignore.