HSBC profits disappoint ahead of ‘bumpier’ financial times

HSBC-700x450.jpgHSBC has reported a lower-than-expected 2015 pre-tax profit for the end of 2015, as the bank sees a “bumpier” financial environment ahead.

The bank said profit before tax was $18.87bn (£13.28bn) for 2015 against $18.7bn the year before. Net profit for 2015 dropped 1.2 per cent to $13.52bn from the previous year.

HSBC group chief executive Stuart Gulliver says: “Targeted investment, prudent lending and our diversified, universal banking business model helped us achieve revenue growth in a difficult market environment, whilst also reducing risk-weighted assets.

“Strict cost management slowed cost growth and our cautious approach to credit helped keep loan impairment charges low. We made a good start in implementing the plans that we announced at our investor update in June. Delivering against these plans remains our primary focus.”

Group chairman Douglas Flint said HSBC’s performance has been “broadly satisfactory”.

He said China’s slower economic growth would create a “bumpier financial environment” in 2016, but the bank will continue to focus on China as the country becomes more consumer orientated.

Despite the lower-than-expected results HSBC increased its dividend, to $0.51 a share, from $0.50 a share last year.

Russ Mould, investment director at AJ Bell, says: “Some comfort can be drawn from an increase in the full-year dividend to $0.51 from $0.50 – enough for a yield in excess of 7 per cent. But investors will be concerned by the unexpected fourth-quarter loss, 5 per cent increase in full-year operating costs and $500m of impairments taken against loans to oil firms.”

“Although oil loans represent just 2 per cent of the drawn energy loan book (at $29bn) those energy losses helped drive total loan impairments 17 per cent higher to $3.7bn for the year and the market will be nervous about the prospects of more impairments in 2016.

“The banks sector overall has performed terribly so far in 2016, and stands at 12-month lows, as the market clearly believes analysts are too optimistic in their view that aggregate adjusted pre-tax profits for the Big Five FTSE 100 banks will reach £34.7bn in 2016, only just short of the stated pre-tax figure of £35.8bn achieved during the boom times in 2007.”

Earlier this month, HSBC decided to keep its headquarters in London after a 10-month review, and said London as a headquarter is “not only compatible, but offered the best outcome for our customers and shareholders”.