Wed, Feb 22, 2017 - Page 10 News List

HSBC’s profit plunges on ‘risky’ year

OUTLOOK:Despite the drop, bank chairman Douglas Flint said the performance was satisfactory, but there are plenty of risks facing the global economy this year

AP, HONG KONG

London-based bank HSBC yesterday reported that annual profit slumped following a year it said would be remembered for “unexpected economic and political events” and warned of risks this year to the global economy’s continuing recovery.

Europe’s biggest bank said net profit for last year tumbled 82 percent to US$2.5 billion from US$13.5 billion a year ago as annual revenue fell 18.5 percent to US$48 billion.

In the most recent quarter, HSBC’s net loss widened to US$4.2 billion from US$1.3 billion in the same period the previous year.

In a statement, chairman Douglas Flint said uncertainties from last year’s events “temporarily influenced investment activity and contributed to volatile financial market conditions,” although he added that HSBC’s performance was satisfactory.

While he did not mention any specifics, it was likely a reference to, among other things, Britain’s unexpected vote to leave the EU and US President Donald Trump’s election victory.

Flint said the bank recently raised its forecast for global economic growth, based on the increasing chances that the US will make changes to fiscal policy to boost the economy as well as growth in emerging markets.

“Risks to this central scenario, however, remain high,” Flint said, including the effect of rising populism on policy in upcoming European elections, the threat of global trade protection measures from Trump’s administration and uncertainty over Britain’s negotiations to leave the EU.

Flint said the bank has all the “licenses and infrastructure” it needs to continue working with customers once Britain does leave the EU. He also repeated previous projections from the bank that 1,000 staff might need to move from London to Paris over the next two years, depending on how exit negotiations go.

HSBC’s profits were partly hit by its decision to write off the remaining US$3.2 billion in its European private banking business, stemming from its 1999 purchase of Safra Republic Holdings.

The write-off accounted for part of the US$6.8 billion pre-tax loss at its European business last year.

Business at its Asian unit, meanwhile, remained fairly steady, with pretax profit dipping 12.5 percent to US$13.8 billion pre-tax, mainly because of the effect of one-time items.

HSBC is in the middle of trimming back its global operations as it carries out a sweeping reorganization to focus on faster-growing Asia, where it expects the region’s growing affluence to drive profits.

The bank said it would buy back an additional US$1 billion worth of shares in the first half of the year, following a US$2.5 billion buyback last year.

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