HSBC's profits soar in first quarter as bank cuts costs

HSBC reported a 95 per cent increase in pre-tax profits in the first quarter as the bank slashed costs and bad debts.

HSBC reported a 95 per cent increase in pre-tax profits in the first quarter as the bank slashed costs and bad debts.

Profit before tax for the three months to March 31st came to $8.4bn, up from the previous year's $4.3bn, as revenue rose by 14% to $18.4bn from $16.2bn.

The company reduced operating expenses by 10% to $9.3bn from $10.3bn and cut loan impairment charges and other credit risk provisions by 51% to $1.1bn from $2.3bn.

The fall in costs come on the back of the company's three-year restructuring that is nearly complete.

"While continuing uncertainty in the global economy has created a relatively muted environment for revenue growth, we have increased revenue in key areas including residential mortgages and commercial Banking in both our home markets of Hong Kong and the UK, and in our Financing and Equity Capital Markets business," said Chief Executive, Stuart Gulliver.

"Loan impairment charges were lower in every region, notably in North America. Our continued focus on cost management contributed to an improvement in our underlying cost efficiency ratio."

Gulliver has already slashed $3.5bn in annual expenses and cut 38,000 jobs. He has made 52 deals to shed businesses that deliver low profits or lack scale but is struggling to get costs to below a target of 52% of income.

HSBC increased its capital, with its core tier 1 ratio up to 12.7% from 12.3%.

Gulliver said the bank's performance in April continued the trend it saw in the first quarter. He expects challenges ahead given the poor macroeconomic outlook.

"However, we expect the mainland Chinese economy to accelerate after a slower than expected start to the year; the US to continue to outperform its peers, although the pace of growth is slow compared to past standards; the Eurozone to contract; emerging markets to grow at around 5.0% and global growth to be around 2.0% for 2013," he added.

"We have strengthened our capital position and remain one of the best-capitalised banks in the world, allowing us both to invest in organic growth and grow dividends. Our strategic direction remains unchanged. Later this month we will update investors on the next phase of its implementation."

Shares rose 3.07% to 735.70p at 10:09 Tuesday.

RD

Recommended

The MoneyWeek Podcast: picking stocks is fun, but you need to do your homework
Investment strategy

The MoneyWeek Podcast: picking stocks is fun, but you need to do your homework

John Stepek talks to Steve Clapham, investor, analyst and author of The Smart Money Method, about the dangers in picking individual stocks and why you…
8 Apr 2021
BP looks set to return more money to shareholders as it beats expectations
Energy stocks

BP looks set to return more money to shareholders as it beats expectations

Oil major BP is to embark on a share buyback programme after significantly reducing its debts. Saloni Sardana looks at what it means for your portfoli…
6 Apr 2021
Deliveroo has hit the market – but it’s not getting the warmest welcome
UK stockmarkets

Deliveroo has hit the market – but it’s not getting the warmest welcome

Food delivery company Deliveroo made its debut on the stockmarket this morning. But with the share price sliding by 30% straight away, it’s not made t…
31 Mar 2021
Three stocks to buy now that will come back stronger after Covid-19
Share tips

Three stocks to buy now that will come back stronger after Covid-19

Professional investor Ed Wielechowski of Odyssean Capital, chooses three compelling stocks that should thrive in a post-pandemic world.
29 Mar 2021

Most Popular

“Joke” cryptocurrency dogecoin goes to the moon. What’s going on?
Bitcoin

“Joke” cryptocurrency dogecoin goes to the moon. What’s going on?

Dogecoin – a cryptocurrency created as a joke – has risen by more than 9,000% this year alone. Saloni Sardana looks at how something that began as an …
19 Apr 2021
The FTSE 100 has clawed back above 7,000 – how much higher can it go?
UK stockmarkets

The FTSE 100 has clawed back above 7,000 – how much higher can it go?

The FTSE 100 index has risen to over 7,000 for the first time in over a year – it now sits just above where it was in 1999. But its era of neglect cou…
19 Apr 2021
The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021