HSBC hits pause on mass layoffs after profits plunge by nearly 50%

Hong Kong(CNN Business) HSBC (HBCYF) is ramping up the amount of money it is setting aside to cover bad loans as its profits plummet because of the coronavirus pandemic. It is also suspending plans to lay off tens of thousands of staff.

The London-based lender on Tuesday said that pre-tax profit dropped to $3.2 billion in the first quarter, a 48% plunge compared to a year earlier.

The bank added that it increased its allowance for expected credit losses this year to as much as $11 billion — nearly $2 billion more than it had set aside at the end of last year. It said expected credit losses rose to $3 billion last quarter in part due to coronavirus.

It also attributed its recent woes to the ongoing plunge in oil prices.

"The outlook for world economies in 2020 has substantially worsened in the past two months," the company said in a statement.

The coronavirus outbreak first hit Asia, where HSBC derives the vast majority of its earnings. The lender has in previous quarters made almost 90% of its profit in the region.

Performance there was actually "resilient" compared to expectations, the bank noted. Profit in Asia fell about 25% in the first quarter, compared to steep losses in North America and Europe.

HSBC also said it is now hitting pause on parts of its vast restructuring plan, which had included a decision to cut 35,000 jobs and dramatically overhaul its business.

The initiative was announced in February, and would have made up "one of the deepest restructuring and simplification programs in the bank's history," according to CEO Noel Quinn, who was named permanent chief executive last month after serving on an interim basis.

For now, Quinn said the bank is suspending the "vast majority" of that restructuring plan to reduce uncertainty for employees.

HSBC is also delaying part of its plan to shed $100 billion in assets, which is expected to help reduce restructuring costs for this year.

"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 Quinn.

"We continue to press forward with the other areas of our transformation."

Major banks everywhere are trying to insulate themselves from bad loans as the pandemic wreaks havoc on the economy. JPMorgan (JPM), for example, said earlier this month that it is setting aside a stunning $6.8 billion worth of reserves to insulate itself from loan defaults. Wells Fargo (WFC) is building a massive reserve, too.

HSBC and other UK banks have also halted dividend payments after being requested to do so by that country's financial services regulator — another sign of how the global economic downturn is taking a financial toll.

— Julia Horowitz contributed to this report.