HSBC HSBC Holdings PLC

By Margot Patrick 

HSBC Holdings PLC said it would buy back another $2 billion in shares but its stock tumbled nearly 3% in Hong Kong after reporting rising costs in the first quarter.

HSBC posted a $3.09 billion net profit for the January-March period, slightly down from $3.13 billion a year earlier and in line with analyst expectations. It said operating costs rose 13%, or 8% after one-off provisions, outpacing a 3% adjusted revenue rise.

Chief Executive John Flint in an interview said the expense rise was the result of investments in areas such as digital banking and that HSBC is still on track to grow revenue faster than costs over the full year.

"Given the state of the world at the moment and the opportunities in front of us, there are opportunities for us to invest in growth," Mr. Flint said. "The fact we're investing in the business is a sign of strength."

Mr. Flint, with HSBC since college, became CEO in February after previously heading the bank's retail division and holding other top roles. Under former CEO Stuart Gulliver HSBC went through a radical restructuring to improve profits, exiting dozens of businesses and entire parts of the globe. It is still one of the world's largest banks with $2.7 trillion in assets.

Mr. Flint said HSBC's strategy is working but that work is under way on "updating and refreshing" plans that will be announced at or before first-half results in August. Analysts expect Mr. Flint to indicate there will be more exits from certain retail markets and a scaling up of HSBC's insurance and asset-management arms, among other moves.

At an investor meeting last week, Mr. Flint said the bank can't realistically set any aggressive new financial targets until it meets current ones such as reaching a 10% return on equity. In 2017, the return was 5.9%. It improved in the first quarter to 7.5%.

HSBC has been buying back stock after saying it couldn't currently find better ways to invest capital. The announcement Friday of another $2 billion buyback disappointed some analysts though since HSBC said it was likely to be the only one this year. UBS analysts said they had expected $4 billion in buybacks this year.

Kenan Machado and Chester Yung contributed to this article.

Write to Margot Patrick at margot.patrick@wsj.com

(END) Dow Jones Newswires

May 04, 2018 03:17 ET (07:17 GMT)

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