HSBC turns in flat profit growth amid bleak circumstances

HSBC chief executive officer Stuart Gulliver (above) has been accelerating plans to scale back the lender's vast global footprint, seeking to boost profitability and reverse a share slump this year.
HSBC chief executive officer Stuart Gulliver (above) has been accelerating plans to scale back the lender's vast global footprint, seeking to boost profitability and reverse a share slump this year.

HONG KONG • HSBC yesterday said it saw a "bumpier" financial environment ahead after delivering flat profit growth for 2015, against a bleak backdrop of a slowdown in China and tumbling prices of commodities.

For the full year, HSBC reported profit before tax of US$18.87 billion (S$26.5 billion) against US$18.7 billion the year before, below the average analysts' estimate of US$21.8 billion, according to Thomson Reuters data.

Europe's largest bank posted a fourth-quarter loss as revenue slumped, and it booked fair-value losses on its own debt. The pre-tax loss of US$858 million compared with a profit of US$1.73 billion a year earlier, HSBC said.

Analysts surveyed by Bloomberg on average forecast a US$1.95 billion profit for the quarter.

Operating costs in the period amounted to US$11.5 billion and the bank declared a dividend of 21 US cents for the quarter.

HSBC chief executive officer Stuart Gulliver has been accelerating plans to scale back the lender's vast global footprint, seeking to boost profitability and reverse a share slump this year.

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

Its investment bank had a US$1 billion profit in the period, compared with a year-earlier loss of US$85 million.

Impairments on bad loans increased by 32 per cent to US$1.64 billion.

HSBC plans to cut risk-weighted assets by about US$290 billion, about a quarter of the bank's total, while redeploying around US$100 billion to US$150 billion of risk-weighted assets in Asia. The bank is targeting a return on equity of more than 10 per cent by next year.

Last year, Asia represented 83.5 per cent of global pre-tax profit for HSBC, a larger portion than a year earlier and a sign that the bank's future growth is tied to the region's.

HSBC proposed to hike its dividend to 51 US cents per ordinary share against 50 US cents a year earlier. This is a relief to investors who had worried the lender's more constrained capital position would cause management to abandon the goal of progressive dividend growth.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on February 23, 2016, with the headline 'HSBC turns in flat profit growth amid bleak circumstances'. Print Edition | Subscribe