HSBC Holdings PLC (LON:HSBA) saw its shares drop on Tuesday after the bank reported 2018 profits that missed forecasts after a poor performance in the fourth quarter amid market turmoil created by US-China trade tensions.
The FTSE 100-listed lender reported pre-tax profit for the quarter to 31 December 2018 of US$3.26bn, down from US$5.33bn in the previous quarter, and below forecasts for around US$4bn, as adjusted quarterly net operating income fell to US$12.7bn, down from US$13.80bn in the previous quarter.
For the year ended 31 December 2018, HSBC posted a reported pre-tax profit of US$19.9b, up 15.9% from US$17.2bn a year earlier but below the consensus estimate of US$22bn, as reported revenue rose by 5% to US$53.8bn, driven by a rise in deposit revenue across its global businesses, albeit primarily in Asia.
The lender’s core common equity tier 1 (CET1) capital ratio - a key measure of financial strength - fell to 14% at the end of 2018, down from 14.5% a year earlier, mainly due to adverse foreign exchange movements.
HSBC’s CEO John Flint commented: “Profits and revenue were both up despite a challenging fourth quarter, and our return on tangible equity is significantly higher than in 2017.”
He added: “This is an encouraging first step towards meeting our return on tangible equity target of more than 11% by 2020.”
The bank said it would pay a full-year dividend of US$0.51 per share, in line with analysts’ expectations, and added that it was confident of maintaining the dividend at that level.
In late morning trading, HSBC shares were 4% lower at 637.30p.
Higher costs impact too
Richard Hunter, head of markets at interactive investor, commented: "A tough fourth quarter took its toll on some of the numbers, whilst a slowing Chinese economy, partially fuelled by the ongoing trade spat with the US, has yet fully to wash through. As such, 2019 could begin to see some real impact in an Asian region whose reported profits contribute almost 90% of the group total."
He added: "Meanwhile, the key metric of the adjusted jaws figure slipped into negative territory and resolving this is a priority in the coming year. Elsewhere, adjusted operating expenses also ticked higher, as did some of the realised impairments, whilst the bank is notably concerned on the current state of play with regard to the UK’s exit from the European Union. Regulatory and collective litigation costs are also proving something of a drag both financially and in terms of management attention."
-- Adds Q4 numbers, analysts comment, share price --