HSBC profits beat market forecasts on lower costs and strong Asia performance

HSBC said it planned to make further investments in Asia to aid growth while the turnaround plan for its US business was on track but remained its “most challenging strategic priority”.

HSBC says it is "proactively managing costs"

HSBC Holdings PLC (LON:HSBA) reported a 31% increase in first-quarter profit, boosted by a strong performance in its core Asian business and lower costs.

Pre-tax profit rose to US$6.21bn in the three months to the end of March from US$4.97bn a year ago, beating analysts’ expectations of US$5.58bn.

Revenue increased to US$14.4bn from US$13.7bn, led by growth in the retail banking and wealth management division (RBWN) and commercial banking unit (CMB) in Asia.

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RBWN revenue increased 10% and CMB gained 11%. 

The global banking and markets business saw revenue edge up 3% but the global private banking division dropped 4%, mainly due to a poor performance in the US.

Absence of legal and regulatory expenses boost numbers

Operating expenses fell 12%, supported by one-off sales in the retail and commercial businesses as well as the absence of legal and regulatory costs that the bank booked a year ago.

“We are proactively managing costs and investment in line with this more uncertain outlook, and will continue to do so,” said chief executive John Flint.

The bank’s core capital ratio, a key measure of financial strength, climbed to 14.3% at the end of March from 14.0% at the end of 2018.

The Asia operations delivered a 5% increase in pre-tax profit to US$5bn, accounting for 81% of the group’s total.

The North American business swung to a pre-tax profit of US$379mln in the quarter from a loss of US$596mln last year as retail customer numbers increased and the lender continued to capitalise on its international network.

HSBC said it planned to make further investments in Asia to aid growth while the turnaround plan for its US business was on track but remained its “most challenging strategic priority”.

Shares gained 2.2% to 683p in morning trading.

"Undoubtedly positive numbers", says Hargreaves Lansdown

"HSBC results are never straightforward, and we could point to the presence of exceptionals boosting numbers and challenges in the investment bank as potential spoilers," said Nicholas Hyett, equity analyst at Hargreaves Lansdown.

"But when you employ 238,000+ staff across the globe, it’s never going to be the case that everything’s shining at the same time.

"These are, in our view, undoubtedly positive numbers and if HSBC can continue delivering its current returns and growing capital we see little reason returns to shareholders won’t follow suit.”

Quick facts: HSBC

Price: 574.2 GBX

Market: LSE
Market Cap: £116.32 billion

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