Slowing China hits HSBC profit growth hopes

Tim Wallace
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PROFITS jumped 10 per cent at HSBC after a campaign to cut costs and close inefficient business units, the bank announced yesterday.

But the first half results fell short of investors’ hopes as emerging markets growth missed expectations, leaving the lender’s shares down 4.37 per cent at the end of the day.

Pre-tax profits came in at $14.1bn (£9.2bn), an increase of $1.3bn compared with the same period of 2012.

That was bolstered by a 13 per cent fall in operating expenses, a $2.8bn fall from $18.4bn, outweighing the seven per cent fall in net operating income which came in at $34.4bn.

Loan impairment charges also fell, down 35.4 per cent to $3.1bn, and headcount fell by more than 12,000 to 259,397. However, some costs increased – the bank hired another 1,600 staff in regulatory and financial crime compliance units.

HSBC’s core tier one capital ratio rose from 11.3 per cent to 12.7 per cent on the year, while return on equity rose from 20.5 per cent to 12 per cent.

But weak revenues in countries like‚ÄąChina point to some risks for the bank.

HSBC’s own emerging markets index, published this morning, points to falling economic output across the examined countries.

The index’s score of 49.4 comes in below the expansion point of 50 and represents its lowest score in four years.

Chinese output fell for a second consecutive month, the survey says.