Making bank: HSBC profits soar past expectations but it warns of global economy risks
HSBC hailed rocketing profits for its first quarter today as it also sounded a warning over risks to the global economy.
Read more: Metro Bank's shares in meltdown after profits halved
Reported profit before tax rose 30.7 per cent to $6.2bn in the three months to the end of March, the bank revealed.
Revenue rose five per cent, benefiting from positive market impacts and gains made from various disposals.
Meanwhile reported operating expenses declined 12 per cent, though adjusted expenses rose 3.2 per cent.
Earnings per share soared 40 per cent to $0.21 while HSBC released an interim dividend of $0.10 per share.
Why it’s interesting
HSBC credited its profit bump to higher revenue in its retail banking and wealth management (RBWM) division, saying margins have increased, while disposals netted it $157m.
RBWM revenues rose 10 per cent – or by $500m – as UK and Hong JKong lending and deposits increased, while higher interest rates fuelled profit margins.
Meanwhile HSBC’s commercial banking arm saw revenue grow 11 per cent, or $400m, as UK and Hong Kong divisions benefited from wider deposit margins as well as growing UK balances.
This all helped the bank hit a net profit of $4.1bn and revenue of $14.4bn, outstripping analyst expectations of $3.7bn net profit and $13.9bn in revenue.
However, HSBC confirmed it is preparing for a round of cost-cutting to counter “risks to revenue growth” amid deepening concerns for the worldwide economy.
While the bank reiterated its financial targets for the year it said managing its costs would enable it “to meet risks to revenue growth, given the current uncertain economic environment”.
David Buik, an analyst at trader Core Spreads, said: “Margins were worryingly thin at 1.59 per cent, down from 1.67 per cent this time last year and a fair bit below Lloyds Banking Group (2.9 per cent).”
Shares rose two per cent to 681.7p in early morning trading.
Read more: Activist investor Ed Bramson suffers heavy defeat in Barclays board battle
What HSBC said
John Flint, group chief executive, said: “These are an encouraging set of results, particularly in the context of heightened economic uncertainty globally. We remain focused on executing the strategy we outlined last June, while also being alert to risks in the global economy.”