Hurt by Asia, HSBC’s Quarterly Earnings Decline 18%

Written by | May 7, 2014 | 0

LONDON – The British bank HSBC reported on Wednesday that first-quarter profit fell 18 percent amid a slump in its Asian operations, which account for more than half its earnings.

HSBC, based in London, said earnings fell to $5.21 billion from $6.35 billion in the period a year earlier. The first quarter of 2013 included a $553 million gain on the sale of its holdings in Ping An Insurance of China and a $1.1 billion accounting gain from the reclassification of its stake in the Chinese lender Industrial Bank.

On an underlying basis, HSBC said pretax profit fell 13 percent, to $6.62 billion, from $7.59 billion in the first quarter of 2013. The bank’s underlying profit included adjustments for the effect of foreign currency movements and acquisitions.

In Asia, HSBC’s profit before tax fell 31.7 percent, to $3.76 billion.

Revenue declined 13.8 percent, to $15.9 billion. Net interest income — the measure of what a bank earns on its lending after deducting what it pays out on deposits and other liabilities — fell 2.8 percent, to $8.72 billion.

And HSBC said it continued to experience “muted customer activity” in April.

“In the first quarter, we maintained control of costs and further demonstrated our capital resilience,” Stuart T. Gulliver, HSBC’s chief executive, said in a statement. “Whilst revenue was lower than the previous year’s first quarter, which benefited from a number of specific items, we have seen progress in revenue over the trailing quarters.”

In a research report on Wednesday, two Citigroup analysts, Ronit Ghose and Andrew Coombs, said the bank’s results were in line with their estimates, but that cost reductions were ahead of expectations.

HSBC’s operating expenses declined 5 percent, to $8.85 billion, while charges for poorly performing loans and other credit risks fell 31.9 percent, to $798 million, from $1.17 billion in the period a year earlier.

The bank’s common equity Tier 1 capital ratio, a measure of its ability to absorb losses, slipped to 10.8 percent at the end of the first quarter from 10.9 percent at the end of the of the year-earlier period.

European banks are required to have a minimum common equity capital ratio of 4 percent this year under the so-called Basel III rules, but larger banks are required to maintain a higher minimum, which is set by national regulators.

HSBC, one of the world’s largest banks, operates in more than 75 countries and had assets of $2.76 trillion at the end of the first quarter.

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