HSBC’s shares hita 25-year low today after news that it led fraudsters use its accounts.
The company has already been facing serious headwinds because of the pandemic, namely the risk of a large jump in customer bad debts and the prospect of low interest rates for a long time in many of its operating regions.
Banks will find it harder to grow earnings when rates are low. This earnings struggle also affects their future growth opportunities as companies like HSBC will effectively be missing out on extra profit that could be reinvested back in their business to either make them more competitive, accelerate growth through making additional loans to customers, strengthen balance sheets or pay more dividends to shareholders in the future.
AJ Bell’s Russ Mould said: “Adding to HSBC’s woes have been political tensions between Hong Kong and the US, the bank being less efficient at generating profits than before the global financial crisis, and a prolonged period of underperformance with its US operations.
“If many investors were sceptical about owning the shares because of those reasons, they are certainly not going to be rushing to buy them when there are allegations of money laundering. It’s another risk to pile on top of the others.”
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