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HSBC zeroes in on cost cuts after profit beat

HSBC/Bloomberg

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HSBC made 80 per cent of its profit in Asia, while Europe accounted for about one per cent, highlighting the importance of Hong Kong and China to its earnings.

Sunday 05, May 2019

(Bloomberg) --HSBC Holdings’ Chief Executive Officer John Flint is pressing ahead with a plan to rein in costs after the Asia-focused lender reported its best quarter in more than three years.

The better-than-expected first quarter results were driven by revenue growth that increased at triple the pace of adjusted operating expenses, reversing a pattern that bedevilled the CEO in 2018.

John Flint, the Chief Executive Officer HSBC,said, “These are an encouraging set of results, and we remain focused on executing the strategy we outlined last June, we are proactively managing costs and investment.”

Keeping the top line growing faster than expenses, known in banking jargon as positive jaws, has been a key focus for Flint as he seeks to put his stamp on the bank. The CEO berated his most senior managers in March for missing cost targets.

HSBC’s adjusted pre-tax profit rose 9.5 per cent in the first quarter to $6.35 billion, versus the $5.69 billion consensus estimate of 16 analysts compiled by the bank. Adjusted revenue rose nine per cent, also ahead of estimates.

Europe’s biggest lender has faced questions over its strategy since it failed to deliver on a pledge to deliver positive jaws in 2018. The London-based bank elevated Flint last year to replace Stuart Gulliver, bringing to an end a seven-year term marked by asset sales, job cuts and a pivot toward Asia.

Since Flint took over in February of last year, the shares are down about 10 per cent.

HSBC is still investing heavily in technology including a new global mobile platform for its retail network, although it warned that its ongoing US turnaround plan is the biggest strategic challenge for the lender.

Chief Financial Officer Ewen Stevenson said HSBC was in talks with US regulators as part of their annual stress tests to repatriate a significant amount of surplus capital from the bank’s American business.

HSBC’s investment bank, which sits under global banking and markets, booked revenues which rose three per cent year-on-year to $4.1 billion driven by its cash management and transaction banking units.

TAGS : HSBC, John Flint, Investment Bank

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