HSBC 2015 results disappoint amid 'seismic' economic shifts
HONG KONG, China (UPDATED) – Global banking giant HSBC on Monday, February 22, reported a shock pre-tax loss in the last quarter of 2015 with results for the year missing analysts' expectations, as the bank grapples with "seismic shifts" in the world economy.
HSBC last year announced a radical overhaul of its business to cut costs that included shedding 50,000 jobs worldwide, exiting unprofitable businesses, and focusing more on Asia.
Like many global banks, HSBC is combating turmoil in global financial markets that has seen stocks and commodities plunge, while stricter regulations have driven up costs.
Last week Europe's largest bank said it would keep its headquarters in London, despite concerns about growing regulation in Britain and an upcoming vote on whether it could leave the EU.
Net profit for 2015 dropped 1.2% to $13.52 billion from the previous year, HSBC said in a filing Monday, while pre-tax profit of $18.9 billion missed analysts' forecast of $21.8 billion.
Group chairman Douglas Flint described the performance as "broadly satisfactory" in a statement.
But shares slumped after the news, falling 1.8% in Hong Kong.
Analysts were troubled by news the bank swung to a $858 million pre-tax loss in the last quarter, compared to a $1.95 billion profit forecast from a Bloomberg News survey.
"We didn't expect they would report a (quarterly) loss," said financial analyst Jackson Wong of Simsen Securities.
In a press conference Monday, CEO Stuart Gulliver pointed to high loan impairment charges in the fourth quarter – up 32% to $1.64 billion compared with the same quarter in 2014.
The bad-loan charges were partly driven up by the oil and gas sector, the company said.
In a new blow, HSBC also revealed it is one of the banks being investigated by the US Securities and Exchange Commission in relation to its hiring practices in Asia-Pacific.
The investigation is looking at hiring practices of candidates "referred by or related to government officials or employees of state-owned enterprises in Asia-Pacific," the report said.
HSBC said it was cooperating with the investigation.
It comes as the bank tries to move beyond recent scandals, including the rigging of foreign exchange markets.
Gulliver said in a statement that cost-cutting measures meant HSBC was now a "leaner business."
But he admitted plans to sell HSBC's Turkey business announced as part of the cuts had been put on hold after the bank failed to find any buyers.
"We have received a number of offers for our business in Turkey since June, none of which were deemed to be in the best interests of shareholders," Gulliver said.
"We have therefore decided to retain and restructure our Turkish operations."
Flint said China's slower economic growth would create a "bumpier financial environment" in 2016, but the bank would continue to focus on the world's second-largest economy as it becomes more consumer orientated.
HSBC earlier this month decided to keep its headquarters in London after a 10-month review, but Flint last week told the BBC it could shift 1,000 jobs to Paris if Britain votes to leave the EU in June.
During a results presentation on Monday, Flint said the bank supported Britain staying within the EU.
"Our own economic research is very clear that Britain is better positioned to be within a reformed Europe," he said in a conference call.
The bank began its review of where to put its headquarters in April last year, two weeks before a British general election, amid growing calls for a crackdown on the financial sector seen by many voters as feckless.
It cited as a reason for the review the British bank levy introduced in 2010 – a tax based on the size of any British-based banks' global balance sheet, which has since been scaled down.
Hong Kong was the main contender to become the new headquarters, but in its announcement of the decision to stay put, HSBC described London as "ideally positioned" to remain its home base. – Dennis Chong, AFP / Rappler.com