HSBC yesterday blamed new global regulations for its decision to slash its expectations for future profit.
Despite booking pre-tax profits of $19bn (£11.8bn) last year, more than double the amount it made in 2009, the bank said the cost of complying with tough new Basel III regulations, designed to make the financial sector safer, would cut its return on equity target by one fifth.
Stuart Gulliver, chief executive of the emerging markets-focused bank, downgraded HSBC’s return on equity (ROE) forecast, a measure comparing shareholder investment with profits, from 15 to 19 per cent to 12 to 15 per cent for the year ahead. HSBC recorded an ROE of 9.5 per cent last year, almost double the figure posted for 2009.
HSBC also said it planned to focus on increasing its Tier 1 capital requirements – despite having already strengthened its core ratio from 9.4 per cent to 10.5 per cent last year. Financial director Iain Mackay said that rulemakers needed to bring “some certainty” to the exact ratio it would need to hold to meet Basel III before it could promise higher profits.
HSBC’s loan impairment charges fell by more than $12bn to $14bn – its lowest figure since before the credit crunch. Despite the improvement, the profit which fell short of analyst predictions of some $20bn together with the ROE downgrade, saw shares in the bank close 4.8 per cent lower yesterday at 677.04p per share.