Rising costs, US settlement crimp HSBC’s first-half profit

HONG KONG: HSBC Holdings Plc posted a small increase in first-half pretax profit, as rising expenses from investments in a new growth strategy and a US$765 million (RM3.12 billion) settlement for alleged mis-selling of US mortgage securities ate into higher revenues.

Shares in Europe’s biggest bank dipped in London as investors and analysts await clearer signs of progress in the new HSBC management’s strategy of shifting into growth mode after years of shrinking its global empire.

HSBC reported yesterday a pretax profit of US$10.7 billion in the six months through June, up 4.6% from the year-ago period.

As the bank spent on hiring more frontline staff and expanding digital capabilities, its costs climbed 6% to US$17.5 billion.

“HSBC is struggling to convince that its current restructuring to pivot the group toward Asia is delivering the hoped for pick-up in growth,” said Steve Clayton, manager of the Hargreaves Lansdown UK Income Shares fund.

HSBC CEO John Flint, who started in the job in February, set out a three-year plan in June to invest US$15-17 billion in areas such as technology and in China.

“We are taking firm steps to deliver the strategy we outlined in June. We are investing to win new customers, increase our market share, and lay the foundations for consistent growth in profits and returns,” Flint said in a statement.

Flint is part of a new management duo at HSBC after Mark Tucker joined as chairman last October. – Reuters