Dim outlook for HSBC’s UK business in 2017
HONG KONG/LONDON: HSBC Holdings warned of a dim outlook for its British business next year and urged the government to clarify the status of European Union workers in Britain as Europe’s biggest bank grapples with the impact of the vote to leave the EU.
“UK retail banking profit will be challenging next year,” chief executive Stuart Gulliver told Reuters yesterday, pointing to the Bank of England’s muted economic growth estimates and forecast for sharply rising inflation.
Gulliver said the financial industry has communicated its priorities to the government. Because HSBC has a fully licensed subsidiary in France it is in no hurry to set up businesses elsewhere to protect access to European markets.
“The thing I would say that is slightly more urgent is clarity around the status of EU nationals with jobs working in the UK,” Gulliver told reporters on a conference call.
HSBC employs around 42,000 workers in Britain of whom some 2000 are from other EU countries. British firms are employing immigration lawyers to advise such staff over fears around their residency, Reuters reported in July.
Against a backdrop of shrinking profits, HSBC reported a sharp jump in its core capital ratio to 13.9%, as the key measure of financial strength was lifted by a change in the regulatory treatment of its investment in China’s Bank of Communications.
The change in how Britain’s Prudential Regulation Authority treats the investment eased analyst concerns about its ability to build capital buffers to maintain its dividend payouts and lifted HSBC’s shares.
In early afternoon deals, HSBC’s London share price surged 4.72% to 622.90 pence, after Hong Kong stock finished 2.96% higher at HK$59.15.
HSBC posted an 86% fall in reported pre-tax profit to US$843 million for the third quarter ended on Sept 30, as it took a US$1.7 billion loss on the sale of its Brazilian unit and faced falling revenues from trade and adverse foreign currency movements.
Adjusted pre-tax profit – which strips out one-off items and unfavourable currency movements – rose 7% in the three months to September to US$5.59 billion from a year earlier. The bank posted a net loss of US$204 million for the three-month period, reversing a year-earlier net profit of US$5.23 billion.
HSBC last year announced a radical overhaul to cut annual costs by US$5 billion over two years by shedding 50,000 jobs worldwide, exiting unprofitable businesses and focusing more on Asia. – Reuters, AFP