HSBC begins John Flint era with 4% profit fall

HSBC Holdings Plc's announcement of a $2 billion share buyback wasn't enough to placate investors, who sent the stock tumbling after the bank reported costs rose at a faster pace than revenue in the first quarter.

The bank's pre-tax profit for the first three months of the year fell to $4.755 billion from the $4.961 billion a year ago.

Friday's results underwhelmed investors and HSBC shares fell 2.5 per cent in early London trading to 703.7p.

Still, the bank - the largest foreign bank operating in China - increased its investments on the mainland and in the United Kingdom in retail banking and wealth management.

"This has enabled us to announce a further share buyback", he said.

The bank made over 75 per cent of its profits in Asia past year.

The CEO said he believed he had the capacity to invest in new technology while keeping a lid on costs and could achieve positive jaws - the difference between the rates of revenue and cost growth - by the end of the year.

HSBC's common equity tier 1 ratio - a measure of financial strength - was 14.5 per cent at the end of March, flat compared with end-December and higher than 14.3 per cent in the first quarter of past year.

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Europe's biggest bank by assets said that this would likely be the only share buyback this year, as CEO John Flint looks to invest instead in the bank's twin homes of Britain and China in a bid to boost returns.

The results for the quarter were the first presented with HSBC's new leadership duo in place.

He succeeded on the last front, bucking a six-year decline in annual revenues, but was also forced to disclose that HSBC faced at least $1.5 billionn in penalties over alleged tax evasion and money laundering connected to its Swiss private bank - a sign that such troubles will fall to another generation of leaders.

HSBC's common equity tier 1 ratio - a measure of financial strength - was 14.5 percent at the end of March, flat compared to end-December and higher than 14.3 percent in the first quarter of 2017.

Rising interest rates helped the bank generate more profit from a large base of deposits after years of low rates in the USA pushed down margins.

"We'll be interested to see how much the Hong Kong interest rate will benefit them", he said.

More generally, with much of the growth coming from HSBC's wealth management, commercial and retail banking in Asia, the decision to focus on that region appears to be paying off.

  • Darren Santiago