HSBC results miss analysts’ estimatesHeat Profit
Departing HSBC chief Stuart Gulliver has signed off with mixed results for 2017, hitting several hard-fought targets but also coming in below analysts’ expectations on profits and revenues.
Bucking a six-year decline in annual revenues, HSBC said that it brought in $51.5bn in adjusted revenues, a 5 per cent increase on the year before but still below a consensus of projections from analysts.
Europe’s largest bank posted $2.3bn in adjusted pre-tax profit for the last three months of 2017 after reporting a loss for the same period a year ago. Pre-tax profit for the full year came in at $20.99bn, up 11 per cent but falling below expectations.
The mixed results on Tuesday afternoon in Hong Kong saw shares fall by 3.2 per cent in early afternoon trading.
The earnings results are the last to be delivered for the bank by Mr Gulliver as he prepares to hand over control this month to incoming leader John Flint, HSBC’s former global head of retail banking. Mark Tucker, former chief executive at Asian insurer AIA, took over as HSBC chairman from Douglas Flint in October.
“HSBC is simpler, stronger, and more secure than it was in 2011,” Mr Gulliver said in a statement. “It has been my great privilege to lead HSBC for the last seven years, and in handing over to John I am confident the organisation is in great hands.”
Signs of a turnround for the bank became evident in mid-2017 with a sharp rise in profits and the continuation of its share buyback plan. The bank announced share repurchases worth $5.5bn.
HSBC’s share price has reflected the optimism. Since April 2016, the bank’s shares in London have climbed more than 80 per cent to 760.5p at the end of trading on Monday.
As expected by many analysts, the bank said it would pay out an annual dividend of $0.51 for 2017, flat on the year before.
The bank’s common equity tier one ratio, a measure of its ability to handle a crisis, hit 14.5 per cent, up from 13.6 per cent last year. It noted that it planned to raise between $5bn and $7bn in additional tier one capital in the first half of 2018.
Many of the targets Mr Gulliver set out in a big restructuring plan in 2015 have been met.
The bank has cut more than $6bn in costs, it said on Tuesday, one of Mr Gulliver’s top priorities. It has also shed $338bn in risk-weighted assets since 2015, surpassing the original target.
Return on equity, at 5.9 per cent in 2017, is still far below the bank’s target of 10 per cent.
HSBC’s Investment bank, at the heart of Mr Gulliver’s restructuring efforts, took in $5.8bn in adjusted pre-tax profits 2017, an increase of about 5 per cent over the previous year.
The unit weathered a high-profile personnel storm in late November when Matthew Westerman, then co-head of global banking and Markets, stepped down. A Goldman Sachs veteran, Westerman was brought in 18 months earlier to drive growth in the Investment bank but was said to have clashed with colleagues.
HSBC’s performance in Asia, where it generates most of its profits, has been tracked closely by analysts. Mr Gulliver has touted the bank’s expansion in places such as China’s Pearl River delta as a core element of his restructuring plan since 2015.
The strategy, which has sought to redeploy risk-weighted assets into faster growing Markets, has had mixed results, with critics pointing out that HSBC’s growth will be limited by strong competition from local banks.
The bank said on Tuesday that its so-called “pivot to Asia” was responsible for up to three-quarters of its profits in 2017.
Efforts by Mr Gulliver and Mr Flint to repair the bank’s image in the wake of allegations of money-laundering and evading sanctions have showed progress, and in 2017 HSBC put several embarrassing scandals behind it.
In December, the US Department of Justice dismissed deferred criminal charges for money-laundering and sanctions breaches that have threatened the bank for half a decade. In November, HSBC agreed to pay €300m to French authorities to settle a long-running Investigation into allegations it helped wealthy clients of its Swiss private bank evade taxes.