* 2018 profit before tax $19.9 bln versus $22 bln estimate
* Bank takes $165 mln Brexit provision
* GRAPHIC: https://tmsnrt.rs/2GN1haO (Adds Brexit charge, updates share reaction)
By Sumeet Chatterjee and Lawrence White
HONG KONG/LONDON, Feb 19 (Reuters) - HSBC warned it may have to delay some investments this year as Europe's biggest bank missed 2018 profit forecasts due to slowing growth in its two home markets of China and Britain.
Its shares fell 3 percent and analysts cut their forecasts as HSBC reported a drop in fourth-quarter revenue amid tumbling stock markets that sapped customer's confidence in investing.
The results spoke to a wider problem for European banks, which are struggling to return to growth after a decade of post-crisis restructuring due to a worsening global economic outlook.
At the end of his first year in charge, Chief Executive John Flint said HSBC may have to delay investment plans in order to avoid missing a key target known as 'positive jaws' - which tracks whether the bank is growing revenues faster than costs - for a second straight year.
"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," Flint said on Tuesday, after HSBC reported a lower-than-expected 16 percent rise in 2018 profit before tax.
In June, Flint had said HSBC would invest $15-$17 billion over three years in areas including technology and China, while keeping profitability and dividend targets little changed.
"The key thing is just to moderate the pace of investments ... not to cancel it or change the shape of the investments," Flint told Reuters.
The bank said it failed to achieve positive jaws in 2018 due to the weakness of markets in the fourth quarter.
A combination of U.S.-China trade tensions, central banks turning off the money taps and cooling growth in former hot spots wiped 10 percent off MSCI (Frankfurt: 3HM.F - news) 's 47-country world stocks index last year, its first double-digit loss in any year since the 2008 global financial crisis.
GROWING BUT SLOWLY
Flint's comments come as an economic slowdown in China challenges HSBC's strategy of pouring more resources into Asia where it already makes nearly 90 percent of its profits.
China's economic growth slowed to 6.6 percent in 2018, the weakest in 28 years, weighed down by rising borrowing costs and a clampdown on riskier lending that starved smaller, private companies of capital and stifled investment.
Pressure on the world's second-largest economy could increase if Beijing and Washington do not reach a deal soon to end their year-long trade dispute, which is taking a growing toll on export-reliant economies from Asia to Europe.
HSBC's profits in Asia grew by 16 percent to $17.8 billion last year, accounting for 89 percent of group profit.
"Clearly our customers are really more cautious and are more thoughtful around this trade war with the U.S.," Flint said.
"It's possible that we'll see a slightly lower growth rate this year but we are still going to see a growth rate."
Since taking over from Stuart Gulliver last February, Flint has largely stuck to the same China-focused strategy as his predecessor while attempting to revive HSBC's ailing U.S. franchise and putting less emphasis on its investment bank.
HSBC set aside $165 million against possible future bad loans in Britain, which it said reflected the increased risks of a potential economic hit from Britain's departure from the European Union, scheduled for next month.
"The longer we have the uncertainty the worse it's going to be for the customers. Customers are absolutely postponing investment decisions ... and that's been the part of this slowdown that we have seen in the UK," Flint said.
HSBC reported a profit before tax of $19.9 billion for 2018, versus $17.2 billion the year before, but below an average estimate of $22 billion, according to Refinitiv data based on forecasts from 17 analysts.
The bank said it would pay a full-year dividend of $0.51 per share, roughly in line with analysts' expectations. HSBC was confident of maintaining the dividend at this level, it said.
The bank's core capital ratio, a key measure of financial strength, fell to 14 percent at the end of December from 14.5 percent at the end of 2017, mainly due to adverse foreign exchange movements.
(Reporting by Sumeet Chatterjee and Lawrence White; Additional reporting by Alun John in Hong Kong; Editing by Himani Sarkar and Mark Potter)