By Margot Patrick 

HSBC Holdings PLC reported lower-than-expected fourth-quarter profit as choppy financial markets, U.S.-China trade tensions and Brexit uncertainty weighed on it.

The global bank's shares fell 4% in London trading after the bank 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. Net profit for 2017 was $9.68 billion.

Net profit in the fourth quarter was $1.54 billion, compared with a $274 million net loss in 2017 on one-time charges.

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 on 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. around its scheduled 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 overall at HSBC but some units posted double-digit declines.

Its global-markets business recorded $1.1 billion of revenue in the last three months of the year, down from $1.34 billion in fourth quarter of 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 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 19:07 ET (00:07 GMT)

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