HSBC posts loss on bad loan; shares fall

LONDON: HSBC Holdings posted an unexpected fourth-quarter loss as income from lending fell, loan-impairment charges increased and it booked fair-value losses on its debt.

The shares fell as much as 4.5 per cent as Europe’s largest bank reported a pretax loss of $858 million. Excluding onetime items such as a $773 million charge on movements in the fair value of its debt, the lender had a pretax profit of $1.9 billion.

Both measures fell short of analysts’ estimates.

The result, depressed in part by the rising cost of bad loans to oil and gas companies suffering from crashing energy prices, marks a setback to chief executive officer Stuart Gulliver’s efforts to bolster profitability and reverse a share slump.

In June, the CEO unveiled a new strategy to boost investment in Asia, exit unprofitable countries and cut as many as 25,000 jobs to help save as much as $5 billion by the end of 2017.

“Weakness in revenue and higher impairment” fueled the miss, said Raul Sinha, an analyst at JPMorgan Chase with an underweight rating on the stock. The “impairment spike was driven by oil and gas” and “weak” performance in Asia, where the bank makes most of its profit.

Lending costs

Impairments on bad loans and credit-risk provisions increased by 32 per cent to $1.64 billion in the quarter. That took full-year charges to $3.7 billion, exceeding the consensus analyst estimate of $3 billion. The increase in badloan charges in HSBC’s wholesale banking division, which accounted for almost $1 billion of loan impairment charges in the quarter, was driven by the oil and gas sector, the company said.

HSBC dropped 4.4 per cent in London, bringing its loss this year to 20 per cent. In Hong Kong also, shares dropped.