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

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