HSBC profits halved at the start of the year as it joined the growing rank of banks setting aside large amounts of capital to absorb the expected economic hit from the coronavirus outbreak.
The banking giant said it has put aside $3billion (£2.4billion) to cover loan and credit card defaults expected to rise amid the Covid-19 pandemic, sending pre-tax profits for the first three months of the year falling 48 percent to $3.2billion (£2.6billion).
Its quarterly results were also hit by declining oil prices as well as 'a significant charge related to a corporate exposure in Singapore'. HSBC shares fell 1 percent to 412.20p in morning trading.
The Asia-focused bank also announced it will not lay off staff for now as it delayed its big redundancy programme announced in February.
HSBC, which was forced by regulators to suspend dividend payments and share buybacks last month, said turnover will continue to be under pressure due to lower levels of lending and market volatility, with interest rates cut to just 0.1 percent eating into margins.
It also warned that a rise in fraudulent activity could lead to 'potentially significant' credit losses.
'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,' said HSBC chief executive, Noel Quinn.
'The resultant increase in expected credit losses in the first quarter contributed to a material fall in reported profit before tax compared with the same period last year.'
The bank said total provisions for the year to cushion the impact of the coronavirus outbreak could range from $7billion to $11billion.
Return on tangible equity - a measure of a company's physical capital, which is used to evaluate a financial institution's ability to deal with potential losses - slumped to 4.2 percent from 10.6 percent.
The bank's Asian unit, which provides the lion's share of the business, reported a 27 percent fall in adjusted profits to $3.7billion (£3billion).
Richard Hunter at Interactive Investor said: 'Sharply lower earnings due largely to the pandemic and markedly higher credit loss impairments are fast becoming par for the course given the global economic backdrop.
'Challenges remain legion. Historically low-interest rates will continue to pressure margins, the pandemic is already resulting in lower customer and more general economic activity, credit losses will inevitably follow'.
He added: 'If there are glimmers of hope at the moment, these tend to be in those areas where HSBC has some control of its own destiny. Operating expenditure has been reduced by 5 percent, the general financial strength of the bank has resulted in a slight improvement to its capital buffer, while a slight tailwind has come in the form of Net Interest Income, up 1.9 percent in the period.'
HSBC is the first of the 'Big Four' banks to report its first-quarter results, with Lloyds, RBS and Barclays set to follow in updating investors this week.
