HSBC Holdings PLC (LSE:HSBA) shares dropped 4.5% on Wednesday, wiping £7.4 billion from the bank’s market value, after quarterly results missed expectations due to heavy losses on its investment in China’s Bank of Communications (BoCom).
HSBC’s reported pre-tax profit fell 29% year-on-year to $6.3 billion, missing forecasts by nearly $700 million.
The shortfall was driven mainly by $2.1 billion of dilution and impairment losses related to BoCom, after HSBC did not take part in a government-backed equity raise and also booked a further impairment charge.
Additional restructuring and disposal costs brought total “notable items” to $2.8 billion, Shore Capital noted.
Excluding these exceptional charges, HSBC’s underlying performance was robust, with pre-tax profit actually coming in 10% ahead of consensus estimates on stronger income from core businesses.
The bank kept its interim dividend steady at 10 cents and announced a fresh $3 billion buyback, slightly above expectations.
Looking ahead, management reiterated guidance for a mid-teens return on equity, excluding notable items, despite raising its forecast for bad loan charges.
Shore Capital said upgrades to revenue forecasts are possible, excluding the BoCom impact, but overall guidance remains unchanged.
The stock fell 43.9p to 926.1p.