Challenging market conditions cause HSBC profits dip, but it could have been worse
Banking giant HSBC has today revealed that its profits had slipped in its first quarter of 2016, kicking off the start of a week of earning announcements from notable names.
Shares in the company were trading down 0.9 per cent at 448.4p shortly before 9:30am London time.
The figures
The bank announced an adjusted profit before tax for the three months ended March 2016 of $5.4bn (£3.7bn), down 18 per cent from $6.6bn the year before, while reported profit before tax dropped to $6.1bn, down 14 per cent from $7.1bn in the prior year.
Meanwhile, adjusted revenue fell to $13.9bn, down by four per cent, in what the company described as “challenging market conditions”.
Why it’s interesting
Granted, it’s not the best news to come back to after the bank holiday but it’s better than expected. This was predicted to be one of the worst quarters for the bank since the financial crisis so, all things considered, many investors should be able to stomach a 14 per cent drop in reported profits.
The bank also announced that it would be maintaining its first quarter dividend of $0.10 per share. At the bank’s AGM last month, group chairman Douglas Flint revealed that “we are ever more conscious of the importance of our dividend to shareholders”.
What HSBC said
“Our first quarter performance was resilient in tough market conditions that affected the entire banking sector,” said group chief executive Stuart Gulliver. “Profits were down against a very strong first quarter of 2015, but we increased market share in many of the product areas that are critical to our strategy.”
What analysts said
Echoing the bank’s sentiment of tough market conditions, Laith Khalaf, senior analyst at Hargreaves Lansdown, remarked that HSBC had still performed better than many had expected and added:
It is still very much work in progress at HSBC as the bank is engaged in a major repositioning, which will see it become much more focused upon its Asian roots and far less exposed to volatile investment banking activities. While currently problematic, the focus on Asia could prove rewarding in the long term, if HSBC executes its strategy well.