HSBC Profit Misses Estimates Amid Uncertainty -- WSJ
February 20 2019 - 3:02AM
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 (February 20, 2019).
HSBC Holdings PLC reported lower-than-expected fourth-quarter
profit as choppy financial markets, U.S.-China trade tensions and
Brexit uncertainty weighed on it.
The global bank's shares fell 4% in London trading after the
bank said cost growth outstripped revenue at the end of 2018. The
bank said customers held off on business when markets turned
volatile last year, hitting revenue in its global markets business
and retail-banking and wealth-management units. It reported a
full-year net profit of $12.6 billion, less than the $13.71 billion
analysts expected. Net profit for 2017 was $9.68 billion.
Net profit in the fourth quarter was $1.54 billion, compared
with a $274 million net loss in 2017 on one-time charges.
HSBC Chief Executive John Flint in an interview said the bank
had been on track to meet fourth-quarter cost-control targets until
revenue collapsed in parts of the bank in November. He said it was
"very much a fourth-quarter problem" and that the bank started 2019
in a "fundamentally different" position. One way to avoid a repeat,
he said, will be to delay or stagger planned investments in the
coming year.
Mr. Flint is marking his first year as CEO and didn't signal any
shifts in a strategy update on HSBC's focus on Asia for growth. He
said the trade dispute between the U.S. and China hadn't had any
effect on the credit quality of customers but had resulted in
weaker loan demand. HSBC Chairman Mark Tucker on Tuesday said
differences between the U.S. and China are likely to continue to
"inform sentiment" this year. HSBC is one of the world's largest
trade finance banks by revenue and stands to lose from disruptions
in supply chains and business activity from the trade spat.
The bank said it adjusted provisions for potential loan losses
relating to trade and tariff-related tension and took a $165
million charge in the fourth-quarter to reflect the increased level
of economic uncertainty in the U.K. around its scheduled departure
from the European Union. That brought its total Brexit-related
provision last year to $410 million. The charges were calculated by
considering possible economic scenarios from Britain's EU exit,
HSBC said.
Mr. Flint said the bank is prepared for Brexit but that
uncertainty around the terms of the exit have caused some
businesses to delay investment and that "customers are desperate
for certainty."
Full-year revenue at the bank was $53.78 billion, up from $51.4
billion in 2017. Fourth-quarter revenue was up overall at HSBC but
some units posted double-digit declines.
Its global-markets business recorded $1.1 billion of revenue in
the last three months of the year, down from $1.34 billion in
fourth quarter of 2017.
In the U.S., Mr. Flint said the turnaround of the bank's
business is still a work in progress and that it has "a long way to
go" to hit a 6% return-on-equity target by 2020. The figure was
2.7% in 2018. HSBC has around 1.3 million retail-banking and
wealth-management customers in the U.S., clustered mainly on the
east and west coasts, as well as commercial- and investment-banking
operations in the country.
Also Tuesday, HSBC said the European Commission has asked it for
information around potential coordination in foreign-exchange
options trading. It said the matter is at an early stage.
Chester Yung contributed to this article.
Write to Margot Patrick at margot.patrick@wsj.com
(END) Dow Jones Newswires
February 20, 2019 02:47 ET (07:47 GMT)
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