- Title: HSBC posts profit drop, warns of gloomy UK outlook
- Date: 7th November 2016
- Summary: LONDON, ENGLAND, UNITED KINGDOM (FILE) (REUTERS) VARIOUS OF EXTERIOR OF HSBC BUILDING IN CANARY WHARF HSBC ENTRANCE HSBC SIGN MAN AT HSBC CASH POINT
- Embargoed: 22nd November 2016 14:57
- Keywords: HSBC bank banking profit Stuart Gulliver Brexit
- Location: LONDON, ENGLAND, UNITED KINGDOM / HONG KONG, CHINA
- City: LONDON, ENGLAND, UNITED KINGDOM / HONG KONG, CHINA
- Country: United Kingdom
- Topics: Company News Markets,Economic Events
- Reuters ID: LVA00157G3BF1
- Aspect Ratio: 16:9
- Story Text:HSBC Holdings warned of a dim outlook for its British business next year as slowing economic growth following the vote to leave the European Union hampers Chief Executive Stuart Gulliver's drive to boost revenues at Europe's biggest bank.
"UK retail banking profit will be challenging next year," Gulliver told Reuters on Monday (November 7), pointing to the Bank of England's economic growth estimates and forecast for sharply rising inflation.
Against a backdrop of shrinking profits, HSBC reported a sharp jump in its core capital ratio to 13.9 percent, as the key measure of financial strength was lifted by a change in the regulatory treatment of its investment in China's Bank of Communications.
HSBC posted an 86 percent fall in reported pretax profit to $843 million (681 million pounds) for the third quarter ended on Sept. 30, as it booked a $1.7 billion loss on the sale of its Brazilian unit, falling revenues from trade, and adverse foreign currency movements.
But investors saw improvements in other areas of the bank's operations and HSBC shares rose nearly 5 percent in London.
"It does appear as if HSBC appears to have got to grips with some of the operational issues and regulatory issues that have been dogging the business for quite some time. So an underlying improvement in profitability to the tune of about 7 percent or so is a pretty good performance. The uncertainty, of course, is created by the sharp fall in headline profitability which by and large is attributed to the sale of its Brazilian operations," said Jeremy Batstone-Carr, an independent market analyst.
Executives at British lenders last month privately cautioned ahead of reporting their earnings that economic conditions would probably get much tougher next year when Britain is due to formally start the process to leave the EU.
Gulliver said on Monday that the bank had seen limited impact on its British business so far other than a temporary drop in small business loan demand but warned of hard times ahead next year.
The third quarter results statement showed progress on Gulliver's plan to shrink HSBC and dispose of underperforming businesses.
The bank posted a further $57 billion worth of risk-weighted assets (RWA) savings in the third quarter, $40 billion of which came from the sale of its Brazil business, and is now more than 80 percent of the way to achieve its RWA reduction target.
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