When the banking sector cancelled its dividends at the start of this month, HSBC flagged that credit performance had held up well but the coronavirus pandemic was having an effect on some revenues and valuation adjustments as well as lifting expected credit losses.
The global bank will take around US$1bn of charges, analysts at UBS forecast, while also saying they were watchful of how emerging markets banks fare through this shock “given disparate capacities across countries to finance offsetting fiscal and monetary support”.
Wall Street’s big banks this earnings season reported impairment charges for the first quarter that were variously three to six times the level seen this time last year.
Results from the US banks also showed deposits growing much faster than loans, leading Russ Mould at AJ Bell to say “it will be interesting to see if HSBC’s clients also made a dash for cash”.
Shares in BP have lost around 38% of their value so far this year, only slightly less bad than rival Shell.
The issue over whether or not these ‘supermajors’ will retain their dividends is going be the key concern for most shareholders this week, and for new BP boss Bernard Looney it is a tough time to be getting his feet under the desk.
Trading updates about a month ago suggested that both BP and Shell could afford to keep up their dividend payments in the short term, but, that was before crude prices nosedived further.
Given Looney’s February pledge to become a carbon net-zero company by 2050 or “sooner”, it is “a demanding environment in which to attempt to transform the company and deliver as he has promised”, UBS analysts said in a preview.
In particular, investors will be interested visibility in Looney’s divestment plans which is targeted to raise US$10-15bn by mid-2021 and is key in bringing down the sector-leading gearing, with the company announcing on Monday that it has agreed to revisions to the terms of its US$5.6bn Alaskan asset sale, with smaller payments now due from Hilcorp in 2020.
The overall deal consideration remains but now payments will be more staggered than originally envisaged.
Tuesday 28 April:
Published at Tue, 28 Apr 2020 05:00:00 +0000-HSBC and BP updates kick off big weeks for banks and oilers on Tuesday