HONG KONG • HSBC Holdings beat forecasts with a 31 per cent rise in quarterly profit, bolstered by a surge in income from its core Asian business and lower costs due to the absence of legal and regulatory expenses borne in the year-ago quarter.
Reining in costs has been one of the biggest challenges for HSBC chief executive John Flint with the bank last year missing its target of "positive jaws" - which tracks whether the bank is growing revenues faster than costs.
The bank said operating expenses dropped 12 per cent in the March quarter, helped by one-off sales in its retail and commercial businesses and the non-recurrence of regulatory fines.
HSBC booked US$897 million (S$1.22 billion) in legal and regulatory expenses in the first quarter of last year but did not have those and others, such as currency translation costs, in the current quarter.
"We are proactively managing costs and investment in line with this more uncertain (global economic) outlook, and will continue to do so," Mr Flint said in the bank's earnings statement yesterday.
HSBC warned in February that it may have to delay some investments this year as it missed last year's profit forecasts due to slowing growth in its two home markets of China and Britain.
Profit before tax at Europe's biggest lender by assets rose to US$6.21 billion in the March quarter from US$4.76 billion in the same quarter last year. The profit was above the US$5.58 billion average of analysts' estimates compiled by the bank.
AT A GLANCE
US$14.4 billion (+13.6%)
US$6.21 billion (+31%)
The bank's core capital ratio, a key measure of financial strength, rose to 14.3 per cent at the end of March from 14 per cent at the end of last year. Analysts expected the latest end-quarter ratio to be at 14 per cent.
While HSBC has been boosting investments to raise its market share in businesses such as retail banking and wealth management, some of its other units, mainly investment banking, struggled with staff exits and slower revenue growth.
The division, which advises clients on finance and mergers, has lost senior dealmakers and slipped down the rankings in merger advisory and equity capital markets amid internal questions over its strategic direction.
HSBC's investment banking business had a poor first quarter, in common with many of its US and European rivals that saw trading revenues fall as subdued markets kept clients from trading.
The London-headquartered bank, which makes the bulk of its revenue in Asia, saw in the January-March quarter its stock trading business fare particularly poorly, with revenues falling 8 per cent despite a helpful one-off provision release.
Reported pretax profit for the bank's Asia operations rose 5 per cent during the first quarter to US$5 billion, with the region accounting for 81 per cent of the bank's overall profits.
HSBC's regional pivot is centred around China's Pearl River Delta region, with billions of dollars in investment commitments and plans to bolster its retail and wealth management business in the world's second-largest economy.