HSBC shares hit as profit slumps
Results worse than expected
EUROPEAN equities edged higher yesterday, with optimism generated by encouraging manufacturing surveys outpacing a steep decline in shares of heavyweight bank HSBC after a slump in the lender’s annual pre-tax profit.
Europe’s biggest bank dropped 6.5 percent and was headed for its biggest one-day fall in 8 years after its results fell far short of analysts’ estimates as it took hefty writedowns from its restructuring.
HSBC has been among the best- performing European banks since Britain voted last June to leave the EU, climbing more than 50 percent against a 28 percent increase in the European banking index as the bank benefited from appreciation of the US dollar and stronger capital levels.
“The bank is a shining example of how the decline in sterling has bumped up the price of some of the UK’s largest companies, without much progress in underlying profits,” said Laith Khalaf, senior analyst at Hargreaves Lansdown.
“Despite an underwhelming set of full year results, HSBC is making progress in de-risking and restructuring, and ultimately the bank’s focus on the Far East could be its trump card if the Chinese economy starts to fire on all cylinders.”
Underperformed
HSBC was the biggest decliner in the European banking index, which fell 1.4 percent and capped broader stock market gains.
The pan-European STOXX 600 index was quoted 0.2 percent higher in the morning yesterday after falling earlier in the session.
Britain’s FTSE 100 index, dominated by several global banks, underperformed. It was down 0.2 percent following a 3.6 percent plunge in the UK banking index.
The decline in sterling has bumped up the price of some of the UK’s largest companies
However, Germany’s benchmark DAX index was up 0.5 percent, underpinned by a survey showing growth in the country’s private sector picked up in February to reach its highest in nearly three years, driven by humming factories.
Eurozone private sector and manufacturing growth also unexpectedly accelerated to a near six-year high in February and job creation reached its fastest since August 2007, propelled by strong demand and optimism about the future.
Political risk
But investors stayed concerned about the political risk. They have been rattled by the prospect of anti-euro, far-right leader Marine Le Pen staging another political surprise in the race for the French presidency, with a poll on Monday showing her closing the gap with centrist opponents.
Share moves yesterday remained mixed.
Mid-cap firm John Wood dropped 11 percent, the biggest faller in the STOXX 600, after saying that oil and gas markets continued to present challenges and that it remained cautious on the near-term outlook. InterContinental Hotels rose nearly 2 percent after reporting a slightly better-than-expected yearly profit rise.
French oil storage and distribution company Rubis was up 5 percent, the top gainer in the STOXX 600 index, after the company said it would buy Dinesa and its subsidiary Sodigaz.