HSBC could be the first major UK bank to charge checking accounts | HSBC
HSBC could be the first major UK lender to bill customers for checking accounts as it seeks to offset the record low interest rates that depressed bank revenues during the Covid crisis.
The bank’s chief executive, Noel Quinn, said HSBC did not expect to charge basic bank accounts in the UK, the no-frills accounts for more vulnerable customers with poor credit ratings who often restrict daily cash withdrawals.
However, free banking could soon be over for most of the bank’s UK customers who have standard bank accounts with overdrafts.
According to the bank, HSBC held around 14% – or more than 9.8 million – of the roughly 70 million UK checking accounts last year.
Quinn said the basic account operation would remain free, but added, “We will look for the appropriate fee and credit pricing strategy by customer segment in all of our markets to ensure we have a sustainably profitable business going forward.”
In the UK, where most banks don’t charge checking accounts, this would be a controversial decision. HSBC is already charging most bank accounts in other countries, including Canada, the United States, and France, where customers are used to paying for banking services.
Quinn said the review of the fees was directly related to the low interest rates in countries like the UK, where interest rates have been cut Record lows of 0.1% in March. It has beaten how much the bank can make on interest on loans and mortgages compared to the deposits it disburses
“As an institution, we need to look for ways to keep growing our revenues in a low interest rate environment,” he said.
The Bank of England is also reviewing that possible use of negative interest and has instructed lenders to prepare for them. This could depress HSBC’s revenue even further. Bank insiders warn that regular bank fees could be the result of a negative interest rate policy.
However, consumer group Which? warned it would be a “huge and risky move” if HSBC started debiting accounts as customers could simply switch banks.
“The danger for consumers is that if one of the big banks opens the door to charging, the others will follow suit – but the competition for customers would hopefully dictate a number of attractive free accounts for the foreseeable future,” said Gareth Shaw, Welcher’s chief financial officer ?
HSBC also announced just months after the release of plans for that around 35,000 employees worldwide. “We assume that we will increase the Group’s annual cost base above our original EUR 31 billion by 2022 [£24bn] Achieve target while maintaining investment in our focus areas, ”said the bank.
The lender has already cut more than 6,300 jobs this year and expects that number to climb to 10,000 by the end of 2020.
The announcement came when HSBC’s pre-tax profit fell to $ 3.1 billion in the three months to September, a 36% decrease from $ 4.8 billion for the same period last year. However, this slightly exceeded analysts’ forecasts of $ 2.1 billion.
Europe’s largest bank reported lower-than-expected provisions to cover a possible spike in defaults related to the economic fallout from the pandemic. HSBC set aside $ 785 million in the third quarter, less than half of the $ 2 billion forecast by analysts.
This brings the bank’s total write-down to $ 7.6 billion for the year to date. after providing $ 3 billion and $ 3.8 billion in the first and second quarters, respectively.
HSBC said it expects credit losses for 2020 as a whole to be at the lower end of the $ 8 billion to $ 13 billion range.
However, CFO Ewen Stevenson warned that a no-deal Brexit would force them to put more cash aside for bad debt. “I would issue a big health warning around Brexit. It is currently within the scope of our planning assumptions that a trade agreement will be reached. Should this change, we could make a substantial further increase in provision in. see [the] fourth quarter. “
Quinn said he was keen to resume shareholder dividends after the Bank of England forced lenders to cancel the withdrawals because of the Covid outbreak. He said this will depend on economic conditions in early 2021 as well as consultations with regulators. “We’ll try to pay a conservative dividend when circumstances permit,” he said.
HSBC shares rose nearly 4% in afternoon trading, at 330p each, but have fallen more than 40% since February.