Bye-bye generous dividends? HSBC profit down 18pc to US$5.4b

PUBLISHED : Tuesday, 03 May, 2016, 12:51pm
UPDATED : Tuesday, 03 May, 2016, 7:31pm

Britain’s largest bank HSBC on Tuesday reported its latest quarterly pretax profit is down 18 per cent to US$5.4 billion, on a volatile first quarter when revenues from its investment and retail banking as well as wealth management businesses shrunk.

“Market uncertainty led to extreme levels of volatility in January and February, which affected our ability to generate revenue in our markets and wealth management businesses,” said HSBC chief Stuart Gulliver.

In Hong Kong, the bank’s loan growth showed a big decline for the first time since the global financial crisis, which the management said stemmed from big repayments from companies and falling client risk appetites over the uncertain environment, which affected credit demand and spilled over across the board to equities, debt issuances, forex, retail mortgage and even margin lending activities.

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“Hong Kong represents 36 per cent of group profit. It looks like loans in Hong Kong are down 20 per cent on an annualised basis,” said Tom Rayner, analyst at Exane BNP Paribas.

At a conference call with the bank’s top bosses, analysts expressed doubts about HSBC’s ability to uphold its “progressive dividend” policy – outgoing chairman Douglas Flint takes pride in HSBC being the third most generous bank in the world – and wondered if it would have to lower its payout ratio later this year.

Strongly countering it, chief financial officer Iain Mackay said: “The guidance on dividends hasn’t changed and isn’t going to change – unless there is a significant recessionary environment… at which point we’ll certainly update you on that.”

But he later softened the stance to say dividend payout would have to take into account regulators’ still unclear capital requirements and HSBC’s profit performance later this year.

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Gulliver boasted about capturing more market share from other banks in a difficult market. “If you think about those banks who have changed strategy and pulled out of Asia, those are the banks we have taken market shares from,” he said.

“It’s a year-on-year decline. But the figures came much better than expected. Both revenues and costs have beat consensus expectations,” Ian Gordon, head of banks research at Investec, told the South China Morning Post.

The HSBC stock traded down 0.58 per cent in Hong Kong to HK$51.50.