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June 29, 2017

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Lower costs, bad debts lift HSBC profit

LONDON -- Global banking giant HSBC announced on Monday a 22-percent rise in half-year net profits on lower costs and falling bad-debt charges, while noting that slower Chinese growth was impacting its main market Asia.

Profit after tax jumped to US$10.28 billion in the six months to the end of June compared with the first half of 2012, the British bank and Europe's biggest said in an earnings statement.

The result came in slightly below analysts' consensus forecast of profit after tax totaling US$10.52 billion, according to a survey by Dow Jones Newswires, causing the bank's share price to slide in London deals.

"These results confirm the value which is being delivered from the continuing reshaping of the group and from enforcing appropriate cost discipline," Chairman Douglas Flint said in the bank's earnings statement.

HSBC added that its pretax profit rose 10 percent to US$14.1 billion in the first half, while total operating expenses decreased 13 percent.

Charges for bad and doubtful loans and other credit risk provisions dropped to US$3.1 billion.

"HSBC's performance during the first six months of 2013 reflected the trends we saw in the first quarter," HSBC chief exec Stuart Gulliver said in the earnings statement.

"Economic growth remained muted and regulatory changes continued to impact available returns."

Regarding the outlook, HSBC said that "despite slower growth in the short term, the long-term economic trends remain intact."

But Gulliver sounded a note of caution over China, where the economy is growing at a slower pace.

In China, the world's second-biggest economy, "the new emphasis on the quality rather than the quantity of growth is shifting the policy balance away from stimulus and towards reform," he said.

"We believe this is likely to limit the pace of China's growth to 7.4 percent for 2013 and 2014, which is already being reflected in more modest growth figures in other markets, particularly in Asia."

Headquartered in London, HSBC was founded in Hong Kong and sees Asia as its main market. It has slashed costs by billions of dollars and axed tens of thousands of jobs since 2011 under a massive restructuring of the group.

HSBC's share price dropped in reaction to Monday's results, showing a loss of 2 percent at 739.6 pence in morning trade on London's benchmark FTSE 100 index, which was up 0.44 percent.

"Perhaps the only slight surprise in these numbers is the immediate share price reaction, which has drifted south," said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers.

"The key metrics of headline profit, costs, impairments, return on capital and the capital cushion all remain strong or improving."

HSBC said that its core tier one capital ratio stood at 12.7 percent at the end of June.

EU Supervisor, the European Banking Authority, requires core capital to amount to 9 percent of the risks being carried by a bank based within the region, subject to a weighting of each category of risk.

This is higher than international rules created in response to the 2008 global financial crisis, known as Basel Three, which require 7 percent.

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