US-China fears wipe £5bn off HSBC value
MORE than £5billion was wiped from the value of HSBC yesterday as Europe’s biggest bank missed profit forecasts amid trade war fears and slower Chinese growth.
The FTSE 100 heavyweight, which makes nearly 90 per cent of its profit in Asia, grew annual pre-tax profit by 16 per cent to $19.9billion (£15.3billion) – about 5 per cent below expectations – on 5 per cent higher revenue of $53.8billion.
It blamed a “challenging” period for financial markets in the fourth quarter, but said revenue had recovered in January and its credit performance was “robust” despite a weaker UK.
Chief executive John Flint said the bank might have to delay investment plans to avoid missing a key target known as “positive jaws”, which measures whether it is growing revenue faster than costs.
China’s economic growth slowed to a 28-year low of 6.6 per cent in 2018 amid rising borrowing costs and a clampdown on riskier lending.
He admitted that a rise in US tariffs on $200billion of Chinese imports from 10 per cent to 25 per cent could cause significant disruption to supply chains.
Flint said: “Clearly our customers are really more cautious and are more thoughtful around this trade war with the US. It’s possible that we’ll see a slightly lower growth rate this year but we are still going to see a growth rate.”
HSBC has also set aside $165million against possible future bad loans in the UK related to Brexit-linked uncertainty. Shares fell 26½p to 637p.
Russ Mould, investment director at AJ Bell, said: “The figures are a bit of a horror show. The fourth quarter sell-off across the financial markets did its investment banking business no favours. Over the longer term the company would expect its exposure to China and Asia more widely to be a positive driver of growth given the more rapid economic expansion than seen in the West, and a less mature financial sector.
“In the short term the concerns about a US-China trade war are having an outsized impact on HSBC compared with its rivals.”