HSBC Misses Profit Target as Bad Loan Charges Weigh on Results--Update
February 20 2018 - 3:20AM
Dow Jones News
By Margot Patrick
LONDON -- HSBC Holdings PLC full-year profit missed analyst
expectations after the bank was hit by the high-profile collapses
of two borrowers in the U.K. and South Africa.
Debt related to South African retailer Steinhoff International
Holdings NV and U.K. services and construction company Carillion
PLC helped push the bank's bad loan charges to $1.77 billion for
the year, more than expected. Steinhoff announced in December it
had found accounting irregularities and is restructuring. Carillion
went bust in January.
It is HSBC's last set of full-year results under Chief Executive
Stuart Gulliver, who retires from the role Tuesday after 38 years
with the bank. Mr. Gulliver in an interview said his seven years as
CEO produced "satisfactory" outcomes for shareholders, in a period
marked by several damaging scandals for HSBC and broader shifts in
banking regulation and profitability.
HSBC said its 2017 net profit surged to $9.68 billion from $1.30
billion a year earlier, in part thanks to higher revenue from Asia.
Full-year revenue rose to $51.45 billion from $47.97 billion.
Pretax profit of $17.17 billion was less than the $19.55 billion
estimated in a poll of 20 analysts conducted by FactSet.
The bank said it would put a share buyback program on hold while
it raises additional debt in the first half. While marketing the
planned $5 billion to $7 billion in additional Tier 1 capital,
listing rules prevent it from buying back shares. HSBC bought back
$3 billion in shares last year and incoming CEO John Flint said
Tuesday there has been "no change in our attitude" to consider
buying back more shares after the debt sale is completed.
As CEO since 2011, Mr. Gulliver oversaw a dramatic reshaping of
153-year-old HSBC, pulling out of countries and exiting dozens of
businesses to improve profits and reduce risks from financial
crime.
The bank's reputation hit a low in 2012 when it agreed to pay
$1.9 billion to settle allowed drug traffickers and sanctioned
nations from moving money through the U.S. financial system. It
pledged to overhaul its compliance systems and entered a five-year
deferred prosecution agreement with the U.S. Justice Department.
The agreement expired in December without any further action
required.
Mr. Gulliver previously said he would assess his success as CEO
by the bank's stock price at the time of his departure and the
state of HSBC's reputation, among other measures. The shares are up
17% from his start as CEO on Jan. 1, 2011, and 70% since February
2016.
On Tuesday, Mr. Gulliver said the bank has much better controls
and ability now to detect and prevent financial crime, helping to
safeguard its reputation. The bank has met eight of 10 targets Mr.
Gulliver set out in 2015, the two laggards being U.S. profitability
and revenues related to the internationalization of the Chinese
yuan.
Mr. Gulliver's successor, Mr. Flint, is also a career HSBC
banker, having joined in 1989 and most recently served as global
head of retail and wealth management.
--Chester Yung in Hong Kong contributed to this article
Write to Margot Patrick at margot.patrick@wsj.com
(END) Dow Jones Newswires
February 20, 2018 03:05 ET (08:05 GMT)
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