HSBC first-quarter profit rises 34 per cent to $4.13 billion on growth in Asia despite weaker markets

04-May-2019 Intellasia | South China Morning Post | 6:00 AM Print This Post

HSBC said on Friday its profit rose 34 per cent in the first quarter, driven in part by growth in its Asian business and gains in its retail and wealth management operations, even as weaker market conditions weighed on its trading revenue and that of some of its closest banking rivals.

The lender, Europe’s largest bank by assets, reported a profit of $4.13 billion for the quarter, compared with a profit of $3.09 billion the previous year.

“These are an encouraging set of results, and we remain focused on executing the strategy we outlined last June,” chief executive John Flint said in a statement. “At the same time, we remain alert to risks in the global economy. We are proactively managing costs and investment in line with this more uncertain outlook, and will continue to do so.”

On a pre-tax, adjusted basis, the bank reported a profit of $6.35 billion, above a consensus estimate of analysts compiled by the bank.

HSBC is one of three lenders authorised to issue Hong Kong’s currency notes and its shares are widely held by retail investors in the city.

The bank said it would pay an interim dividend of $0.10 a share in July. It also said it would announce any decision on share buy-backs when it reports its first-half results in August.

HSBC’s shares price rose 2 per cent to HK$69.65 in early afternoon trading in Hong Kong, following the announcement, on Friday.

A slowdown in activity by investors compared with last year’s first quarter, and weaker merger and initial public offering activity have cut into trading and investment banking revenues across the industry.

Announced merger and acquisition activity in the Asia-Pacific region to begin the year, was at its lowest level since 2014, based on deal value, according to data from Refinitiv, and remained weak in April.

HSBC, which is based in London, but generates most of its profit in Asia, said revenue from its global banking business was down 9 per cent from the previous year, and its global markets revenue was down 5 per cent due to reduced client activity in the quarter, particularly in its equities business.

Adjusted, pre-tax profit in HSBC’s global banking and markets segment was broadly unchanged at $1.64 billion.

Citigroup, Credit Suisse, Goldman Sachs, JPMorgan Chase, Morgan Stanley and UBS all reported drops in trading revenue in the quarter.

Standard Chartered, a Hong Kong rival, said on Tuesday weaker markets and lower wealth management activity also weighed on its results in the first three months of the year.

Revenue at HSBC rose 19 per cent to $19.62 billion in the quarter, compared with $16.55 billion in the first quarter of 2018. Net interest income rose 1 per cent to $7.47 billion, while operating expenses declined 12 per cent to $8.22 billion.

Keeping down the company’s expenses has been a challenge for Flint, who took the top job in February last year after a career at the bank. Bloomberg, citing people familiar with the matter, reported he criticised senior managers at a global gathering in March over the company’s costs.

The bank said it had a positive adjusted jaws the difference between revenue growth and cost growth of 6 per cent in the quarter. HSBC failed to meet a target of positive jaws last year, causing some shareholders to question the bank’s strategy.

“Underlying cost growth has come back from last year a core objective of mine was to begin to moderate cost growth this year,” Ewen Stevenson, the HSBC chief financial officer, said in a video posted on the company’s website. “So a nice difference between revenue growth and cost growth, or jaws, as we call it.”

The company said its 2020 targets remained unchanged and it would manage costs and investments “to meet risks to revenue growth, given the current uncertain economic environment”.

In HSBC’s retail banking and wealth management segment, adjusted, pre-tax profit rose 19 per cent to $2.23 billion. The bank attributed the gains to a more favourable interest rate environment, balance sheet growth and gains in its life insurance business.

Revenue in Asia, the bank’s largest profit centre, was up 7 per cent in the quarter despite a “softer rate and growth environment”, HSBC said. Adjusted, pre-tax profit in its Asian business rose 8 per cent to $5.04 billion.

HSBC said a turnaround of its operations in the United States was progressing, but “remains our most challenging strategic priority”.

In its North America segment, adjusted profit before tax was down 9 per cent to $388 million.


Category: FinanceAsia

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