Watch: HSBC profits soar
HSBC (HSBA.L) unveiled a surprise jump in profits on Tuesday as the impact of bad loan provisions eased.
The British-Hong Kong bank said its pre-tax profit rose 79% in the first quarter to $5.8bn (£4bn), even as revenue fell 5% to $13bn.
City analysts had expected the bank to report a pre-tax profit of $3.3bn on revenues of $12.6bn.
"We had a good start to the year in support of our customers, while achieving materially enhanced returns for our shareholders," chief executive Noel Quinn said in a statement. "I am pleased with our revenue and cost performance, but particularly with our significantly lower expected credit losses."
Analysts had expected HSBC to take a $1bn charge to cover expected future losses. Instead, the bank released $400m from existing provisions as it judged that it had ample capital set aside to cover future losses.
"The economic outlook has improved, although uncertainties remain," Quinn said. "We carry good momentum into the second quarter, while maintaining conservative positions on capital, funding, liquidity and credit."
HSBC's performance was driven in part due to a strong comeback for HSBC UK, which posted a profit of $1bn in the quarter. A property boom in Britain helped, while the prospect of a "roaring" economic comeback allowed the bank to unlock some of its loss reserves.
Shares rose just over half a percent in London.
HSBC is midway through a transformation plan meant to reverse years of underperformance. Last February the bank announced plans to axe 35,000 jobs and cut cost by $4.5bn (£3.4bn) by 2022. The bank accelerated its plan in February, including an aggressive pivot to Asia.
"The execution of our growth and transformation plans is proceeding well," Quinn said. "We made further progress in reducing both costs and riskweighted assets, and launched new products and capabilities in areas of strength."
The bank saw "solid growth" in its "strategic areas" such as wealth management in Asia, trade finance, and mortgages in the UK.
As part of its cost saving plans the bank is reducing its office space. HSBC has announced plans to reduce its global office space by 40% as staff move to more agile way of working.
HSBC promised an update on its turnaround plans at its half-year results in August.
"There doesn’t look like there is an immediate cure for the bank’s underlying ailment: the ultra-low rates plaguing the banking sector," said Susannah Streeter, senior investment and markets analyst at stockbroker Hargreaves Lansdown.
"HSBC is not alone in feeling the squeeze of net interest margins, which tightened again slightly over the quarter, but other banks with huge investment banking arms have been able to capitalise on the trading surge over the past year."
No quarterly dividend was announced but the bank said the board would consider an interim payout later in the year.
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