HSBC’s first quarter pre-tax profit beats forecasts

HONG KONG: HSBC Holdings Plc yesterday reported a 19% fall in first quarter profit, as Europe’s biggest bank battles to restore flagging revenues following its restructuring.

HSBC said pre-tax profit for the first three months of the year fell to US$5 billion (RM21.6 billion), down from US$6.1 billion a year ago and better than the US$4.3 billion average of analysts’ estimates compiled by the bank.

The profit decline was due to a change in the accounting treatment of the fair value on its debt and as year-ago earnings included the operating results of the Brazil business that it sold in July, it said.

Revenue in the quarter dropped 13% to US$13 billion.

However, the bank’s adjusted profit before tax, excluding the exceptional items, rose 12% in the quarter to US$5.9 billion.

The bank said it completed its US$1 billion share buyback in April, after which its common equity tier 1 ratio – a measure of its financial strength – was 14.3%.

Chief executive Stuart Gulliver said in a statement the bank had now exceeded the risk-weighted asset reduction target that it set in 2015 and would continue to remove low-return risk-weighted assets.

HSBC chief financial officer Iain Mackay ruled out a fresh share buyback in the short term as a means of using some of that excess capital.

“We’ve just finished one, we need to catch our breath a little bit,” he told Reuters yesterday.

Mackay also reiterated the bank’s stance that it will hold its dividend steady for now, quashing shareholders’ hopes that the lender’s robust capital levels would see it boost payouts.

HSBC is expected to receive a further capital boost as it repatriates some US$8 billion currently stuck in its US subsidiary, following approval by the Federal Reserve last year of its plans to begin the process.

HSBC’s shares rose 2% in Hong Kong following the results announcement, outperforming a 0.5% drop in the benchmark Hang Seng Index. – Reuters