A Peek into HSBC's Take on Global Trade Tensions and the US Dollar's Dominance
HSBC executive, Elhedery, upholds confidence in the U.S. dollar amidst deteriorating economic perspective owing to tariffs.
HSBC, a global banking titan, has warned that the intensifying trade war between the world's two largest economies (US and China) is inflicting substantial impacts on their business operations. During a press call, HSBC CEO Georges Elhedery expressed how critical it is for the US dollar to maintain its status as the dominant currency, while also sharing insights about the increases in the usage of the renminbi in trade finance.
With a massive chunk of global trade relying on the US dollar (dollar remains the "lion's share"), there has been a noticeable upsurge in the employment of renminbi, now accounting for about 7-8% of global trade finance. Interestingly, the dollar's status as the world currency has been questioned, partially due to President Trump's far-reaching tariff regime that has deteriorated trust in the US currency.
HSBC, ranking among the largest US dollar clearing institutions and paragon of global trade, is expected to face the heat from this mounting trade war. Elhedery revealed that they have observed a considerable reduction in trade volumes along the US-China corridor in sectors yet to receive a tariff waiver or relief.
Threatening dark clouds gather over the global economy as HSBC anticipates that lending demand will remain stagnant in 2025 due to uncertainty, market tumult, and a deteriorating economic outlook induced by higher tariffs and geopolitical strife. The bank hiked its provisions for bad loans by $202mn to $876mn in Q1 of 2025. Of this, $100mn is designated solely for its Hong Kong commercial property sector exposure.
In a scenario of significantly higher tariffs, HSBC foresees a "low single-digit percentage" drop in revenues and an additional $500mn in incremental bad loan provisions. The bank announced plans for a share buyback of up to $3bn, to kick off post its annual meeting on May 2.
Elhedery suggested that the ringfencing imposed on British banks should be significantly rolled back or abolished because it has resulted in an escalation of costs, capital inefficiencies, and trapped liquidity. This, in turn, has escalated the cost base for businesses in the UK, primarily SMEs, and stifled competition within the UK banking sector.
In his pursuit for cost savings, Elhedery has initiated a cost-cutting plan amounting to $300mn in 2025 and a total $1.5bn from the annual cost base by the end of 2026. The bank is under pressure, portrayed by their Q1 results, which show a 25% plunge in pre-tax profits to $9.5bn, despite a higher than anticipated performance from the wealth management division and strong Hong Kong deposit growth.
- HSBC, a global banking titan, has warned that the intensifying trade war between the world's two largest economies (US and China) is inflicting substantial impacts on their business operations, with the US dollar, the "lion's share" of global trade, experiencing a noticeable upsurge in the employment of the renminbi, now accounting for about 7-8% of global trade finance.
- During a press call, HSBC CEO Georges Elhedery expressed how critical it is for the US dollar to maintain its status as the dominant currency, while sharing insights about the increases in the usage of the renminbi in trade finance.
- HSBC, ranking among the largest US dollar clearing institutions and paragon of global trade, is expected to face the heat from this mounting trade war, with Elhedery revealing that they have observed a considerable reduction in trade volumes along the US-China corridor in sectors yet to receive a tariff waiver or relief.
- Threatening dark clouds gather over the global economy as HSBC anticipates that lending demand will remain stagnant in 2025 due to uncertainty, market tumult, and a deteriorating economic outlook induced by higher tariffs and geopolitical strife.
- In a scenario of significantly higher tariffs, HSBC foresees a "low single-digit percentage" drop in revenues and an additional $500mn in incremental bad loan provisions.
- Elhedery suggested that the ringfencing imposed on British banks should be significantly rolled back or abolished because it has resulted in an escalation of costs, capital inefficiencies, and trapped liquidity, ultimately increasing costs for SMEs and stifling competition within the UK banking sector.
