HSBC's Profit Misses Analysts' Expectations -- Update
19 February 2019 - 10:18PM
Dow Jones News
By Margot Patrick
HSBC Holdings PLC reported lower-than-expected fourth-quarter
profit Tuesday as choppy financial markets, U.S.-China trade
tensions and Brexit uncertainty weighed on the global bank.
HSBC shares fell 4% in Hong Kong after it said cost growth
outstripped revenue at the end of 2018. The bank said customers
held off on business when markets turned volatile last year,
hitting revenue in its global markets business and retail banking
and wealth management units. It reported a full-year net profit of
$12.6 billion, less than the $13.71 billion analysts expected.
HSBC Chief Executive John Flint in an interview said the bank
had been on track to meet fourth-quarter cost control targets until
revenue collapsed in parts of the bank in November. He said it was
"very much a fourth-quarter problem" and that the bank started 2019
in a "fundamentally different" position. One way to avoid a repeat,
he said, will be to delay or stagger planned investments in the
coming year.
Mr. Flint is marking his first year as CEO and didn't signal any
shifts in a strategy update on HSBC's focus on Asia for growth. He
said the trade dispute between the U.S. and China hadn't had any
effect on the credit quality of customers but had resulted in
weaker loan demand. HSBC Chairman Mark Tucker in a statement
Tuesday said differences between the U.S. and China are likely to
continue to "inform sentiment" this year.
HSBC is one of the world's largest trade finance banks by
revenue and stands to lose from disruptions in supply chains and
business activity from the trade spat.
The bank said it adjusted provisions for potential loan losses
relating to trade and tariff-related tension, and took a $165
million charge in the fourth-quarter to reflect the increased level
of economic uncertainty in the U.K. from its departure from the
European Union. That brought its total Brexit-related provision
last year to $410 million. The charges were calculated by
considering possible economic scenarios from Britain's EU exit,
HSBC said.
Mr. Flint said the bank is prepared for Brexit but that
uncertainty around the terms of the exit have caused some
businesses to delay investment and that "customers are desperate
for certainty."
Full-year revenue at the bank was $53.78 billion, up from $51.4
billion in 2017. Fourth-quarter revenue was up across HSBC but some
units posted double-digit declines.
Its global-markets business recorded $1.1 billion of revenue in
the last three months, down from $1.34 billion in fourth quarter
2017.
In the U.S., Mr. Flint said the turnaround of the bank's
business is still a work in progress and that it has "a long way to
go" to hit a 6% return on equity target by 2020. The figure was
2.7% in 2018. HSBC has around 1.3 million retail banking and wealth
management customers in the U.S., clustered mainly on the east and
west coasts, as well as commercial and investment banking
operations in the country.
Also on Tuesday, HSBC said the European Commission has asked it
for information around potential coordination in foreign exchange
options trading. It said the matter is at an early stage.
Chester Yung contributed to this article.
Write to Margot Patrick at margot.patrick@wsj.com
(END) Dow Jones Newswires
February 19, 2019 06:03 ET (11:03 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
HSBC (NYSE:HSBC)
Historical Stock Chart
From Mar 2024 to Apr 2024
HSBC (NYSE:HSBC)
Historical Stock Chart
From Apr 2023 to Apr 2024