HSBC books 141% jump in annual profit

Wednesday, 21 Feb, 2018

The bank reported a 141 per cent rise in reported pre-tax profits to $17.2 billion, but after stripping out one-off items such as the sale of HSBC's Brazilian business the lender said that it made an adjusted profit of $21 billion in 2017, a rise of 11 per cent year on year.

The lender, which controls the compiler of the Hang Seng indexes, posted a 23.5% increase in 2017 net profit to HK$20.02 billion ($2.56 billion) as its net interest margins expanded alongside growth in its fee income.

Authorities in the U.S., Belgium, Argentina, India, Spain and elsewhere are probing allegations of tax evasion or tax fraud, money laundering and unlawful cross-border banking solicitation at the Swiss private bank, HSBC disclosed in its annual report Tuesday.

Over 75 per cent of HSBC's profits now come from Asia.

John Flint, the 49-year-old veteran insider who will succeed Gulliver on Wednesday, said in the statement that he would update shareholders on how the bank's strategy has evolved by the time it releases its 2018 half-yearly results.

"Fears of a hard landing in China have receded, and markets across Asia look set for a strong year", said chairman Mark Tucker. That's not going to help the Footsie, given the gravitational pull HSBC exerts on the index.

Laith Khalaf, senior analyst at Hargreaves Lansdown, warned that HSBC's focus on Asia comes with risks attached.

The London-based banking firm, HSBC, has announced its profit of a year ago, earning £12.3bn (US$17.2bn).

"The soon-to-be old team has done a good job tidying up and refocusing, whilst still leaving plenty of scope for the new team", he added, flagging significant remaining upside for investors as the bank moves toward a targeted 10 per cent return on equity. 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 USA authorities which has only just ended. While profits are growing, they are behind analyst forecasts, which goes some way to explaining the stock price reaction. Similarly, the lack of further share buybacks - for the moment hampered by the bank's efforts to shore up capital further - were the source of some disappointment, as was a slightly softer fourth quarter. Mr Gulliver will be replaced by John Flint, who has been with HSBC since 1989 and most recently headed up the bank's retail banking and wealth unit.