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HSBC FY18 Profit Climbs, Backs Outlook, Maintains Dividend; Stock Down

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Asia-focused lender HSBC Holdings Plc (HSBC,HSBA.L) reported Tuesday higher profit in its fiscal 2018 reflecting revenue growth in all of global businesses, despite a challenging fourth quarter. Further, the company said it reported a good start to 2019, noting that Group revenue performance in January was ahead of plan for the month and actual credit performance remained robust, albeit with some softening of credit performance in the UK.

Regarding outlook, the company maintained its earlier announced targets despite more challenging market conditions at the end of the year and a weaker global economic outlook. In London, HSBC shares were losing around 4 percent in the morning trading.

HSBC further said it remains alert to the downside risks of the current economic environment, especially those relating to the UK economy, global trade tensions and the future path of interest rates.

The bank continues to prepare for the UK's departure from the EU in order to provide continuity for customers in the UK and mainland Europe.

The fundamentals for growth in Asia remain strong in spite of a softer regional economic outlook, it said. China remains subject to domestic and external pressures, but the firm expects it to maintain strong growth.

John Flint, Group Chief Executive, said, "We will be proactive in managing costs and investment to meet the risks to revenue growth where necessary, but we will not take short-term decisions that harm the long-term interests of the business. We plan to achieve positive adjusted jaws in 2019 and remain focused on achieving a return on tangible equity of over 11 percent by 2020, while maintaining a stable dividend."

Further, the company announced a fourth interim dividend of $0.21, bringing the total dividend for 2018 to $0.51, same as last year.

For fiscal 2018, profit before tax rose 16 percent to $19.89 billion from last year's $17.17 billion. Basic earnings per share were $0.63, up from $0.48 last year. Adjusted profit before tax was $21.72 billion, compared to $21.13 billion lat year.

Reported operating expenses dropped 1 percent to $34.7 billion, while adjusted operating expenses grew 6 percent to $33.0 billion.

Revenue was $53.78 billion, up 5 percent from $51.45 billion a year ago, notably driven by a rise in deposit revenue across its global businesses, primarily in Asia. Adjusted revenue rose 4 percent to $53.9 billion. All four global businesses grew adjusted revenue in 2018, despite a challenging external environment in the fourth quarter. Asia region generated 89.5 percent of total revenues.

Return on average tangible equity rose to 8.6 percent from 6.8 percent, up 1.8 percentage points. The company reported Common equity tier 1 ratio of 14.0 percent and CRD IV leverage ratio of 5.5 percent.

In London, HSBC shares were trading at 640 pence, down 3.57 percent. In Hong Kong, the shares fell 2.3 percent to HK$66.15.

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