HSBC’s share price falls as bank reports surprise fall in profits
HSBC’s share price opened down this morning after the bank reported a surprise four per cent fall in profits, despite a growth in revenues, citing a rise in expenses.
Shares were down 1.4 per cent on the open and continued to tumble to 2.3 per cent, becoming the biggest faller on the FTSE by mid-morning.
But, despite the surprise hit to the bottom line, shareholders were somewhat cheered by plans for a $2bn (£1.47bn) share buyback.
The figures
The bank, which is currently undergoing a major overhaul which has resulted in tens of thousands of people being made redundant in the last couple of years, reported a six per cent jump in revenues to $13.7bn.
However a 13 per cent increase in operating expenses, “primarily reflecting investments to grow the business and enhance our digital capabilities, and the effects of currency translation”, to $9.4bn, pushed pre-tax profit down four per cent to $4.8bb.
Adjusted profit before tax of $6bn was three per cent lower, excluding the effects of currency translation and movements in significant items.
Why it’s interesting
The results are the first announced since John Flint took over as chief executive from Stuart Gulliver, with the newcomer stressing he will get the bank back on track after a series of scandals including HSBC’s involvement in laundering money for Mexican drug cartels.
Shareholders may have hoped for better news on the profits front but they might take comfort from the planned share repurchase programme – expected to be the only one HSBC offers in 2018 – “in light of the growth opportunities that we currently see”.
More generally, with much of the growth coming from HSBC’s wealth management, commercial and retail banking in Asia, the decision to focus on that region appears to be paying off.
What HSBC said
Flint said: “Our global businesses performed well in the first quarter, maintaining momentum from the end of 2017. We continue to benefit from interest rate rises and economic growth, particularly in Asia.
“Our primary focus is to grow the businesses safely, and we have increased investment to deliver that aim. We intend to deliver positive jaws [the ratio for how income growth exceeds expenses growth] for 2018.”