HSBC more than doubles pre-tax profit for 2017

Gladys Abbott
February 21, 2018

HSBC reported profit before tax of $17.2 billion up $10.1 billion on 2016, which included a loss on the operations in Brazil the bank sold the same year.

The failure to live up to analysts' estimates marked a rare event in outgoing HSBC chief executive Stuart Gulliver's seven-year reign.

In Hong Kong, the bank's shares closed down 3.1% while in London, they were down more than 4% in morning trade.

The European largest lender by market capitalization, HSBC Holdings, reported a surge in its annual profit before taxes, forecasting a plan to raise up to 7 billion Dollars in funding over the next four months to consolidate its capital base, while the bank is preparing for growth in its new management. "It has been my great privilege to lead HSBC for the last seven years".

HSBC said that this was largely thanks to its recent pivot to Asia, which has been generating returns and driving over 75% of the group's reported and adjusted profit in 2017.

HSBC's fortune turned around in 2017 with an increase in the year's profit. It's not been plain sailing by any means, and he deserves credit for steering the bank though some hard waters, not least the money laundering scandal which cost the bank $1.9 billion in fines and a deferred prosecution agreement with United States authorities which has only just ended.

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A month earlier, HSBC agreed to pay €300mln to French authorities to settle an investigation into claims it helped clients of its Swiss private bank dodge taxes.

The lender said it was planning additional tier 1 capital issuance of between US$5 billion and US$7 billion during the first half, and that it would undertake share buybacks "as and when appropriate". Its common equity tier 1 ratio, a measure of capital, rose to 14.5% from 13.6% a year ago.

Worries over a "hard landing" in China after years of relatively high economic growth have also receded, he said, noting that Asian markets "look set for a strong year" - though rising worldwide tensions and protectionist threats could disrupt the global economy. The long term appeal of this approach is clear, with the Asian middle class set to balloon by a staggering 2 billion people by 2050.

"The strength of HSBC's share price over the last two years has a lot to do with better than expected economic performance from China", Khalaf said. That's not unreasonable given the change of leadership at HSBC, but having received $5.5 billion in share buybacks since 2016, shareholders were probably anticipating a bit more gravy. "That's all well and good, but this cuts both ways, and looking forward if China sneezes, HSBC is going to catch a nasty cold".

Total group revenue rose from $48 billion to $51.4 billion year-on-year, while operating expenses dropped from $39.8 billion to $34.9 billion.

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