HSBC's profits plunge dragging down share price

By Euronews

Published on 21/02/2017 - 13:56

Europe's biggest bank HSBC saw annual pre-tax profit slump 62 percent with hefty writedowns and warned its revenues could fall again this year.

Annual profit at HSBC has slumped, hitting the share price of Europe’s largest bank which fell 6.5 percent in London and 5.0 percent in Hong Kong.

Profit last year was much lower than expected, down 62 percent due to costs from restructuring and the writedown of the value of its private banking activity in Europe.

HSBC generated profit before tax of $7.1 billion (6.74 billion euros) in 2016 compared to $18.87 billion for the previous year

Also hitting its earning were lower interest rates and and slowing economic growth in its core markets of Britain and China.

Though analyst Tom Stevenson with Fidelity International believes its business elsewhere in Asia should compensate: “The concern with HSBC is possibly the slowdown in trade around the world, that’s bad news for banking profitability but I think in the case of HSBC the intra-regional trade, particularly in Asia, could offset that; so the company said today that they were less concerned about the slowdown in trade.”

#HSBC Annual Results 2016 published today #HSBCresults https://t.co/ASZFBA8n2P pic.twitter.com/Zyk5hoMjXn
— HSBC (@HSBC) February 21, 2017

HSBC also warned its revenues could fall again in 2017 with uncertainty over Brexit and Donald Trump’s economic policies. The pressure on its revenues include an increase in regulatory capital costs, lower interest rates in Britain and adverse foreign exchange rates.

Bad actors

The bank revealed that it is under investigation by Britain’s Financial Conduct Authority over possible money laundering by some of its customers.

CEO Stuart Gulliver told reporters on a conference call that he could not estimate the impact of the investigation but that it reflected the bank finding more “bad actors” among its clients as it improves controls.

“It’s quite normal for a bank of our size and scale with 37 million customers to find among them instances of money laundering that we have self-identified or the regulator has identified,” Gulliver said.