Higher Expenses Dent HSBC Profit -- WSJ
August 07 2018 - 03:02AM
Dow Jones News
By Margot Patrick
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 7, 2018).
HSBC Holdings PLC said higher costs weighed on first-half profit
as it embraces ambitious growth plans and steps up investment in
technology and its expanding China business.
Chief Executive John Flint said the higher costs were expected
after it announced plans in June to invest up to $17 billion in
those areas and other parts of its business by 2020. Expenses were
7% higher in the first half of 2018 than a year earlier, helped by
a revenue increase of 4% to $27.29 billion.
Mr. Flint, who started as CEO in February after a career in
other top HSBC jobs, laid out his strategy in June stating the bank
plans to make investments to help improve its returns. The
Asia-focused lender is looking to tap China's Pearl River Delta
region for new retail-banking and wealth-management customers, and
is investing in a new securities venture in China.
HSBC also has been spending on ways to make banking faster and
easier through automation and online applications, as well as its
back-end technology. One example Mr. Flint pointed to is a new app
in Hong Kong to make fast and easy payments that now has a million
users.
Mr. Flint said HSBC is still looking for ways to accelerate
growth in insurance and wealth management in Asia, a cornerstone of
the strategy laid out in June. The move is one of several aimed at
boosting the bank's return on tangible equity above 11% by 2020,
lifting a previous target of 10%. HSBC said the measure hit 9.7% in
the first half.
On the deepening trade dispute between the U.S. and China, Mr.
Flint said "We're not seeing any changes in client behavior --
yet." The conflict has the potential to disrupt client supply
chains across Asia as exporters seek to avoid tariffs. HSBC is one
of the world's largest trade-finance bank, helping exporters across
Asia and other parts of the world bring goods to the U.S. and other
countries.
"People are clearly concerned by the rhetoric. The scenario that
would be difficult is if investors go onto the sidelines and market
sentiment collapses," he said.
Net profit for the first half rose to $7.17 billion from $7
billion on lucrative fees from money managing, particularly in Hong
Kong, and for the quarter rose to $4.09 billion, up from $3.87
billion in the same three months of 2017.
The bank saw higher deposits from retail customers and strong
sales of wealth management products in Hong Kong, which helped push
the revenue contribution of the unit rose to nearly 30% of
first-half profits, up from 27.5% a year earlier. Banks earn
lucrative fees for managing the wealth of wealthy clients who seek
to beat low returns on deposits. HSBC's significant operations in
Hong Kong have helped as rich Chinese choose to keep money in the
city and outside of the mainland.
Kenan Machado contributed to this article.
Write to Margot Patrick at margot.patrick@wsj.com
(END) Dow Jones Newswires
August 07, 2018 02:47 ET (06:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
HSBC (NYSE:HSBC)
Historical Stock Chart
From Feb 2024 to Mar 2024
HSBC (NYSE:HSBC)
Historical Stock Chart
From Mar 2023 to Mar 2024