HSBC yesterday unveiled better-than-expected first-quarter profit, but the result was overshadowed by losses in Europe and a worse-than-expected rise in claims for payment protection insurance (PPI) in Britain.
The bank's profit before tax fell 12.2 per cent to US$4.3 billion. Excluding adverse credit spread movements of US$2.6 billion on the fair value of its debt, underlying profit before tax rose 25 per cent to US$6.8 billion, higher than the US$5.6 billion that had been forecast by CCB International.
The main factors that drove this improvement were increased revenues in global banking and markets, commercial banking, retail banking and wealth management, chief executive Stuart Gulliver said. 'Our performance in April has been satisfactory.'
In Europe, HSBC suffered a pre-tax loss of US$997 million, against profit of US$652 million in the year-earlier period, driven by adverse movements in credit spreads on fair-value of debt of US$2 billion.
Credit valuation adjustments require banks to book losses when the value of their debt rises, and gains when it declines, on the theory that a loss, or profit, would be realised if the bank has to buy back the debt.
While markets have expressed concern at political upheaval in Europe and Sunday's election of socialist Francois Hollande as French president, Gulliver was sanguine.
He said Hollande's accession was not a significant worry for HSBC, which also had manageable exposure to Greece, Portugal and Spain.