HSBC revealed this morning that its profits have dropped dramatically after a series of one-off hits eroded its bottom line, and added that it was considering moving 1,000 jobs from London to Paris because of last year's Brexit vote.
Shares in HSBC Holdings dropped 4.5 per cent at the open and were down 6.5 per cent by mid-afternoon.
The banking giant reported a profit before tax of $7.1bn (£5.7bn) for 2016, down 62 per cent compared with $18.9bn the year before. The figures included a slew of one-off hits, including the disposal of the bank's Brazil operations and a $3.2bn impairment of goodwill for its European global private banking business.
Analysts had predicted the bank would report a profit before tax of $2.7bn for its fourth quarter of 2016, which would have brought full-year profits before tax to $13.3bn, which would have been down 29.6 per cent on 2015.
Reported revenues also plunged to $48bn, down 20 per cent on $59.8bn the year before, with the lender partly blaming unfavourable currency movements for the knock.
Adjusted figures were roughly flat on the year before. The bank announced adjusted profits before tax of $19.3bn, down 1.2 per cent on last year's $19.5bn, and adjusted revenues of $50.2bn, down 2.3 per cent compared with $51.4bn.
The bank also revealed it had completed the $2.5bn share buyback programme it announced at its half-year results and would be launching a new $1bn programme.
HSBC's capital standing improved, with common equity tier 1 capital growing to 13.6 per cent at the end of 2016, compared with 11.9 per cent at the end of 2015, although this was at least partly thanks to regulatory changes surrounding the lender's investment in China's Bank of Communications.
The company also maintained its dividend at $0.51 per ordinary share.
Why it's interesting
It's a tough time to be a banker. Historically low interest rates have put a squeeze on the levels of earnings lenders can expect to rake in, while legal costs and bad loan impairments have continued to add up.
HSBC has also been very vocal about Brexit. Both chief executive Stuart Gulliver and chairman Douglas Flint have previously suggested that up to 1,000 London jobs could be moved to Paris, depending on what level of access rights the UK obtains as part of its EU departure deal.
Flint repeated the 1,000 jobs figure in his chairman's statement today, adding the moves would happen "progressively over the next two years, depending on how negotiations develop".
However, investors hoping for an update on what was happening to Flint's own job were left wanting. The bank has previously announced the search for Flint's successor would conclude this year, but the chairman's only comments on the matter on his statement today were: " This process remains on track and an announcement will be made in due course."
What HSBC said
We anticipate new challenges in 2017 from geopolitical developments, heightened trade barriers and regulatory uncertainty.
However, the changes we have made since 2011 have equipped HSBC to manage the complexity of today’s global business environment.
HSBC is a strong and resilient business with a global universal business model geared to find growth opportunities in a low-growth world
2016 will be long remembered for its significant and largely unexpected economic and political events. These foreshadowed changes to the established geopolitical and economic relationships that have defined interactions within developed economies and between them and the rest of the world.
The uncertainties created by such changes temporarily influenced investment activity and contributed to volatile financial market conditions.
Against this background, HSBC’s performance in 2016 was broadly satisfactory.