HONG KONG • HSBC Holdings' pre-tax profit for 2017 more than doubled due to the absence of hefty restructuring costs incurred in the prior year but still lagged expectations as the bank took a writedown following US tax changes.
Europe's biggest lender by market capitalisation, on chief executive Stuart Gulliver's last day on the job yesterday, also announced plans to further bolster its capital base by raising up to US$7 billion (S$9 billion) in the first half of 2018.
HSBC reported a profit before tax of US$17.2 billion for 2017, compared with US$7.1 billion the year before but below the US$19.7 billion average estimate of 17 analysts polled by Thomson Reuters.
Those estimates did not all take into account the tax writedown, triggered by cuts in the US corporate tax rate which meant banks had to book losses on deferred tax assets they had built up during loss-making times.
HSBC said in its earnings statement that its 2017 financial results included a charge of US$1.3 billion relating to the "remeasurement of US deferred tax balances" to reflect the reduction in the US federal tax rate to 21 per cent from 2018.
Banks including Credit Suisse and UBS have already reported multi-billion dollar writedowns from the tax change, while HSBC's British rival Barclays has said it expects a £1 billion (S$1.8 billion) hit on its annual post-tax profit.
HSBC's year-ago profit figure reflected a US$3.2 billion impairment of goodwill in the global private banking business in Europe and the impact of its sale of operations in Brazil.
The lender said it was planning additional tier 1 capital issuance of between US$5 billion and US$7 billion during the first half, and that it would undertake share buybacks "as and when appropriate". It has been able to maintain its capital buffer despite rolling out share buybacks, the latest of up to US$2 billion last July, and maintain the dividend payments that are key to the stock's support among investors.
"In 2017, we returned a total of US$3 billion to shareholders through share buybacks and paid more in dividends than any other European or American bank," Mr Gulliver said. Company veteran John Flint takes over as the new CEO today.
HSBC's common-equity tier 1 ratio, a key measure of financial strength, was 14.5 per cent in 2017, compared to 13.6 per cent the year before and 11.9 per cent in 2015.
Its reported revenues rose to US$51.4 billion from US$48 billion a year ago.