HSBC annual profit disappoints as CEO Gulliver says goodbye

HSBC’s annual profit fell short of expectations as Stuart Gulliver reported his final set of results as leader of the global bank.

Adjusted pre-tax profit for the 12 months to 31 December rose by $2.1bn (£1.5bn) to $21bn as adjusted revenue increased 5% to $51.5bn and bad debts eased. But analysts said the numbers were disappointing and the bank's shares fell.

Statutory pre-tax profit more than doubled to $17.2bn from $7.1bn as big restructuring costs in 2016 dropped out of the numbers. The 2017 result was less than the $19.7bn average estimate in a Reuters poll of analysts. The annual dividend was unchanged at 51 cents a share.

HSBC shares, which had risen 15% since May, fell 3.7% to 7732.7p at 13:27 GMT. Shore Capital analyst Gary Greenwood said the results were disappointing because profit was slightly weaker than expected and there was little news about returning cash to shareholders.

Greenwood said: "The dividend was maintained but there is no indication as to when growth may resume. The group is signalling further share buybacks will be considered when appropriate but nothing concrete in this announcement. All mildly disappointing, which is not good given the lofty rating it is trading on."

The results, complicated by a $1.3bn US tax charge that some analysts did not include in their estimates, mark the last day as chief executive for Gulliver, who has led the bank through a turbulent seven years. The former investment banker hands over to John Flint, his former chief of staff and recently head of retail banking, on 21 February.

Gulliver has sold or closed businesses to make HSBC less sprawling and more focused on its core operations. He has dealt with the after-effects of rapid expansion that caused the bank to lose its grip on activities in Mexico, where it was used to launder money by drug gangs, and Switzerland, where it admitted aiding aggressive tax avoidance.

Gulliver said: “These good results demonstrate the strength and potential of HSBC. All our global businesses grew adjusted profits and we concluded the transformation programme that we started in 2015. HSBC is simpler, stronger, and more secure than it was in 2011.”

HSBC said it would issue between $5bn and $7bn of tier one capital during the first half of 2018. The bank’s common equity tier one capital ratio increased to 14.5% at the end of 2017 from 13.6% a year earlier.

Analysts at Credit Suisse, led by Claire Kane, said the core tier one ratio was well ahead of HSBC's 13% target and the planned capital issuance could thwart hopes for buybacks. "This could mark a change in capital return strategy for new management" under Flint and Chairman MarkTucker, she said.

Flint said: "These results and the achievements of the last couple of years give us a great platform to build on. The fundamentals of HSBC will remain the same as they always have - strong funding and liquidity, strong capital, and a conservative approach to credit."

Adjusted loan impairment charges fell to $1.8bn from $2.6bn, mainly due to the healthier state of the oil and gas industry in North America. Adjusted operating costs rose 4% to $31.1bn, driven by investment in growth programmes and higher performance-related pay.

Gulliver, who worked at HSBC for 37 years, will leave with a payout of £6.1m for 2017. On top of his £3.9m salary and allowance and £2.1m bonus he will receive £4m of shares. HSBC said Gulliver warranted his pay because he hit most of his targets, including scaling back HSBC’s business and keeping a grip on risk and regulatory compliance.