Sharp rise in profits
HSBC heralds return to growth for banks
HSBC: good start to banking season
HSBC heralded a positive start to the bank reporting season with a sharp rise in annual pre-tax profits.
The headline figure was 141% higher at $17.2 billion (£12.3 billion) against $7.1bn in the previous year. At an adjusted level it 11% up.
CEO Stuart Gulliver’s last set of results before stepping down included a number of restructuring costs and still came below analysts expectations. The bank also said it will look to raise $5-7 billion next year to bolster its capital base.
The profits are flattered by some hefty costs which hit the 2016 figures.
Investors drew further comfort from the decision to maintain its dividend at $0.51 per share, at a cost of $10.2 billion. Total group revenue rose from $48bn to $51.4bn.
Mr Gulliver said: “These good results demonstrate the strength and potential of HSBC. All our global businesses grew adjusted profits and we concluded the transformation programme that we started in 2015. HSBC is simpler, stronger, and more secure than it was in 2011.
“It has been my great privilege to lead HSBC for the last seven years, and in handing over to John I am confident the organisation is in great hands.”
CEO designate John Flint, added: “These results and the achievements of the last couple of years give us a great platform to build on. I am working with the management team and the Board to evolve our strategy and execute it at pace, and I will update shareholders on this work by our half year results.
“The fundamentals of HSBC will remain the same as they always have – strong funding and liquidity, strong capital, and a conservative approach to credit.”
A J Bell investment director Russ Mould, said: “Many retail investors only care about one number with banks and that’s the dividend. People buy these stocks for income as they’ve historically had generous yields.
“In HSBC’s case, there is no growth in the dividend in today’s results, neither is there a new share buyback programme.
“That may surprise given the bank’s common equity tier 1 ratio, a measure of the ability of the balance sheet to withstand economic shocks, has jumped to 14.5% from 13.6% a year ago.
“A better capital position could strengthen the argument for higher dividends in time, yet investors may have to wait another six months for new chief executive John Flint to deliver his strategic review before learning about future dividend intentions.
“For now, HSBC yields about 4.8% which leaves it lagging behind Lloyds Banking Group whose dividend yield is more in the region of 6% based on forecasts for 2018.”