HSBC Q1 profit misses estimate, unveils $2-bn share buyback

HSBC Building

The bank, which is now undergoing a major overhaul which has resulted in tens of thousands of people being made redundant in the last couple of years, reported a six per cent jump in revenues to $13.7bn.

Among HSBC's main four business lines, profit from retail, commercial and private banking rose, while earnings at the investment banking fell, largely because of a 10% drop in revenue from trading.

The bank said it is involved in "active discussions" with the U.S. Justice Department on resolving civil claims and has set aside $897 million in relation to the U.S. probe on its sale of mortgage-backed securities. Mr Flint said the 8 per cent rise in underlying quarterly costs reflected investments in its Chinese and United Kingdom retail banking operations, its Chinese securities joint venture and digital improvements across the group.

"The "bad" element was cost development where cost growth outstripped revenue growth", said Joseph Dickerson, banks analyst at Jefferies.

HSBC said it has a strong capital base, with its common equity tier 1 ratio standing at 14.5% at the end of March, flat from the end of 2017.

On the other hand, the rising costs and subdued return on equity reflect some of the challenges Flint still faces.

Nevertheless, the first-quarter numbers still "represent a good start for 2018 for HSBC", Iain Mackay, HSBC's group finance director, told CNBC's Sri Jegarajah after the release of the results. They are due to present their new strategy at or before their interim results in early August.

HSBC's revenue rose, however, to USD13.71 billion from USD12.99 billion the prior year and from USD12.30 billion in the last quarter of 2017.

In the first quarter, adjusted pre-tax profit hit $6.03bn, or 3 per cent lower than the same period past year, but slightly above analyst expectations of $6bn.

Shares were down 1.4 per cent on the open.

"Our global businesses performed well in the first quarter, maintaining momentum from the end of 2017".

Rising interest rates helped the bank generate more profit from a large base of deposits after years of low rates in the USA pushed down margins.

Flint, who took over as CEO in February, said that HSBC is benefiting from interest rate hikes and economic growth, particularly in Asia. Hong Kong was a major contributor to the positive figures in the unit. Loans grew by $17 billion, or 2 per cent, in the first quarter.



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