HSBC profits rise in 2019 but last quarter hit by trade jitters

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Tourists pose for a selfie as they stand on the top deck of a tram while passing the local HSBC headquarters building in Hong Kong. Banking giant HSBC said on February 19, that pre-tax profit rose 16 per cent to US$19.9 billion last year with growth across its global businesses despite a “challenging external environment in the fourth quarter”. — AFP photo

HONG KONG: Banking giant HSBC said yesterday that pre-tax profit rose last year but it suffered a bruising final quarter as worries over the global economy and the US-China trade war began to bite.

The London-headquartered behemoth told investors it was still aiming to meet targets despite the looming twin storms of Brexit and the long-running trade impasse between Washington and Beijing.

But analysts warned it remained vulnerable to any fallout from either issue becoming a full-blown crisis in the year ahead.

Overall the year saw strong growth for HSBC with profits before tax up 16 per cent at US$19.9 billion, net profit ballooning 30 per cent to US$12.6 billion and adjusted pre-tax profit rising three per cent to US$21.7 billion.

The results capped the first full year at the helm for chief executive officer John Flint, who has vowed growth while keeping a lid on costs.

But the yearly growth figures were dampened by a tough final quarter when the markets – especially those in Hong Kong and China – went into meltdown over global trade fears.

Adjusted pretax profit fell one per cent to US$3.39 billion in October-December, missing the US$4.4 billion consensus average by Bloomberg News derived from estimates compiled by the bank.

Global markets adjusted revenue slipped US$202 million to US$1.1 billion over the same period, while wealth management dropped 18 per cent, also to US$1.1 billion in what the bank said was a “challenging external environment in the fourth quarter”.

Analyst Dickie Wong from Kingston Securities said the bank missed estimates towards the end of the year partly because China and Hong Kong are its “most relied (on) market”.

“The slowing down of the economy, the trade war between China and the US also remain an uncertainty. That’s why it missed estimates,” he told AFP.

Jackson Wong, of Huarong International Securities, said revenues were also a little underwhelming.

“One of the key things I see is their revenue didn’t grow as much as they were expecting, so that their cost efficiency is not improved as expected,” he told AFP.

The firm’s Hong Kong-listed shares were down 1.6 per cent in afternoon trade.

In a statement attached to Tuesday’s earnings, the bank’s leadership said they were prepared to weather fallout from any failure of the the trade talks and Britain’s impending departure from the EU.

“The fundamentals for growth in Asia remain strong in spite of a softer regional economic outlook,” chairman Mark Tucker said in a statement attached to the annual report.

“The system of global trade remains subject to political pressure, and differences between China and the US will likely continue to inform sentiment in 2019,” he said.

He added that progress on trade deals between the EU, Singapore and Japan – as well a large deal among Pacific trading nations – helped cushion those jitters.

With Brexit looming, HSBC followed the other major British financial giants in ring-fencing its UK bank in 2018.

“We continue to prepare for the UK’s departure from the EU”, Flint said, adding its operations in France “gives us a major advantage in this regard”.

Analysts have said that while Britain crashing out of the EU with no deal in place would hit banks hard, HSBC is more insulated than many of its British competitors partly because so much of its business is based in Asia.

HSBC posted a healthy doubling of profits in 2017 but it faced some troubling years before that. — AFP