HSBC HSBC Holdings PLC

   By Kenan Machado 
 

HONG KONG--HSBC Holdings' first-quarter profits dropped 1.3% from a year ago as it set aside money for potential legal liabilities including its role in the sale of mortage-backed securities in 2007.

Net profit for the January-March period stood at US$3.09 billion, compared with $3.13 billion a year earlier, said HSBC, one of the world's largest banks. Net interest income for the period rose 9.9% on-year to $7.46 billion.

Operating expenses for the quarter rose nearly 13% on-year, faster than the 5.5% rise in revenue to $13.71 billion. The bulk of those expenses was related to $897 million in provisions related to legal and regulatory matters, the bank said.

"We are engaged in active discussions with the U.S. Department of Justice with a view toward potential resolution of civil claims," related to the department's investigation into HSBC's role in the sale of residential mortgage backed securities, the bank said. It recognised a provision with respect to this matter as negotiations developed in the just ended quarter, it said.

From 2005 to 2007, HSBC Securities (USA) sold about $24 billion in securities backed by loans from HSBC Bank USA.

HSBC also announced a share buy-back of up to $2 billion, which it expects to commence shortly. This is expected to be the only share buy-back that the bank announces in 2018, it said.

The earnings come as the bank renewed its focus on Asia and fast-growing parts of China. Chief Executive John Flint inherited a wide restructuring exercise initiated by predecessor Stuart Gulliver to make HSBC leaner and more profitable in the wake of 2008's global financial crisis.

HSBC shares were trading 2.7% lower in Hong Kong.

-- Chester Yung contributed to this article.

-Write to Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

May 04, 2018 01:30 ET (05:30 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.