HSBA Hsbc Holdings Plc

   By Julie Steinberg and Anjie Zheng 
 

HONG KONG--HSBC Holdings PLC said market volatility in the beginning of 2016 dragged on its ability to generate revenue as it reported a 18.2% decline in net profit in the first quarter of this year.

The British bank has been grappling with a falling share price and concerns from investors over its strategy in Asia. HSBC's share price is down about 32% from a year ago. Shares in Hong Kong outpaced the Hang Seng Index's 1.1% drop Tuesday and fell 1.4% to HK$51.10.

Chief Executive Stuart Gulliver acknowledged last month that the share price "isn't where we want it to be," and said that keeping costs down and revenue up are big challenges for the bank this year because of weak economic conditions.

The bank said Tuesday that first-quarter net profit fell to US$4.3 billion from US$5.26 billion a year ago. Revenues fell 5.8% in the first quarter to US$14.98 billion.

Once a sprawling bank across 87 countries, HSBC has exited swaths of businesses across the globe to improve profits and cope with tougher regulations since the financial crisis. Its main regions now are Asia, the U.K. and North America. In February, HSBC decided to stay headquartered in London after considering a return to its original Hong Kong base.

HSBC said Tuesday it increased market share in many strategic areas including in debt capital markets, China M&A and syndicated lending in Asia. Current and savings account revenues grew in both Hong Kong and the UK, HSBC added.

The bank has been hit this year by soured sentiment toward commodities and emerging markets, two key planks of its business. Moody's Investors Service in March revised to negative from stable its ratings outlook on HSBC, spurred by the ratings firm's concern that "Hong Kong's increasing economic and financial linkages with China...give rise to potential negative spillovers" from that country "and ultimately weaker growth."

HSBC executives have said Asia will continue to drive future growth for the bank, a strategy that may pay off in the future but is seen as a short-term drag on earnings.

Some investors and analysts have raised concerns about HSBC's strategy in the Pearl River Delta region, including uncertainty over foreign banks' ability to compete for lending and deposits against big state-owned banks. HSBC's ambitions could also be tempered by China's slowdown and a weaker operating environment in Asia Pacific.

Write to Anjie Zheng at anjie.zheng@wsj.com

(END) Dow Jones Newswires

May 03, 2016 01:02 ET (05:02 GMT)

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