UK banks and negative interest: money for less than nothing

The upheaval at HSBC has underscored banks’ poor prospects. Negative interest rates won’t make things any easier. Matthew Partridge reports

Andy Haldane, chief economist of the Bank of England © Jason Alden/Bloomberg via Getty Images
Bank of England chief economist Andy Haldane remains wary of cutting rates below zero © Getty
(Image credit: Andy Haldane, chief economist of the Bank of England © Jason Alden/Bloomberg via Getty Images)

Three months ago HSBC announced what many considered to be “the biggest overhaul in its 155-year history”, says Doug Alexander on Bloomberg. Now the fallout from the virus is forcing it to consider “more drastic measures”. While the crisis forced it to postpone plans to “cut 35,000 jobs,$4.5bn in costs and $100bn of risk-weighted assets”, the board is now pressing executives to “restart the overhaul” as well as consider “even more dramatic changes”. This could include more cuts, or even a possible sale of its US business and its retail network in France.

It’s not surprising that HSBC is thinking about even deeper cuts, say Stephen Morris and Laura Noonan in the Financial Times. The shares “now trade at their lowest in more than a decade”. The bank is dealing with retail investors in Hong Kong who are still “furious” about the fact that, when the crisis started, the Bank of England forced HSBC to cancel its dividend for the “first time in 74 years”. The US operations are also a logical target given that they made a return on tangible equity of just 1.5% last year, compared with 15.8% in Asia and 12% in the Middle East”.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri