HSBC results disappointing, says expert
BANKING giant HSBC has revealed a 62% slump in annual profits amid “volatile” trading caused by the Brexit vote and President Donald Trump’s election.
The London-based lender, which is Europe’s largest bank, posted worse than expected pre-tax profits of £5.7bn, down sharply on the £15.2bn for 2015.
It saw bottom-line losses in the final three months of 2016 quadruple to £2.7bn.
HSBC blamed a string of one-off charges, such as the sale of its Brazilian operations, as well as hefty writedowns from a restructuring.
Douglas Flint, the group’s chairman, insisted the its performance was “broadly satisfactory” in the face of “volatile market conditions” caused by Brexit negotiations as well as Mr Trump’s US presidency.
He said: “2016 will be long remembered for its significant and largely unexpected economic and political events.
“These foreshadowed changes to the established geopolitical and economic relationships that have defined interactions within developed economies and between them and the rest of the world.”
He also warned over the “threat of populism” for the year ahead.
Mr Flint cautioned over risks from “upcoming European elections, possible protectionist measures from the new US administration impacting global trade, uncertainties facing the UK and the EU as they enter Brexit negotiations, and the impact of a stronger dollar on emerging economies with high debt levels”.
He also reiterated 1,000 jobs may have to move from London to Paris over the next two years depending on the outcome of Brexit negotiations.
On an underlying basis, HSBC said pre-tax profits fell by 1% to £15.5bn, stripping out a £2.5bn impairment charge in the European arm, the hit from its Brazilian sale and changes to the value of its own debt. Net profits fell 82% to £2bn.
The results were branded “disappointing” by banking expert Gary Greenwood at Shore Capital.
Shares in the group tumbled more than 6% after the results fell short of City expectations.
HSBC’s annual report published alongside the 2016 results also showed chief executive Stuart Gulliver’s likefor-like potential pay package rose to £7.7m for 2016 from £7.3m in 2015.
This came as the group overhauled its long-term share bonus plan, while Mr Gulliver also saw his annual bonus rise to £1.7m from £1.1m in 2015.
But the group cut its overall bonus pool for staff by 12.3% to £2.4bn for
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2016. The group revealed 245 staff earned more than £1m in 2016.
Its annual report also showed US regulators remain concerned over the bank’s measures to improve defences against financial crime.
The group said the so-called monitor – posted to HSBC’s offices as part of a deferred prosecution agreement after a £1.2bn US money-laundering fine in 2012 – has “raised certain concerns”.
Mr Gulliver added: “But we have continued to progress and our commitment remains unwavering.
“By the end of this year, we are on track to have our anti-money laundering and sanctions policy framework in place and to have introduced major compliance IT systems across the group.”
The group said it was “on track” with its hunt to find a successor to Mr Flint by the end of the year and will make an announcement in “due course”.
It said in March last year it planned to nominate a successor in 2017.
The new chairman will lead the process for selecting a new chief executive to replace Mr Gulliver.