HSBC posts flat profit short of consensus

HSBC has missed full year profit consensus forecasts by 8%, as it missed fourth quarter targets by a long way.

The FTSE 100 bank posted a reported profit before tax of $18.9bn (£13.3bn) for the year to 31 December 2015, up a mere 1.069% from $18.7bn in 2014.

However adjusted profit before tax dropped from $22.0bn to $20.4bn; below market consensus range of $22.0bn-$22.7bn. For the fourth quarter, adjusted profit before tax came in a $3.4bn, below consensus forecasts of $5.1bn.

Adjusted operating expenses for the full year rose 5% to $36.2bn due to wage inflation, business growth and investment in regulatory programmes and compliance.

The bank said expenses in the second half were broadly in line with the first half after excluding the UK bank levy, which reflected strong cost management and the initial effect of its cost saving programmes.

It also said adjusted revenue rose 1% to $57.8bn from $57.2bn in 2014, with growth in Global Banking & Markets, Commercial Banking and Principal Retail Banking and Wealth Management.

The group has also made good progress on reducing its risk weighted assets, cutting $124bn of assets – 45% of its 2017 target – and an agreement signed to sell its operations in Brazil.

The bank highlighted that the current economic environment is uncertain.

“But our diversified banking model, low earnings volatility and strong capital generation give us strength and resilience that will stand us in good stead,” it said.

“We remain focused on delivering our nine remaining strategic actions by the end of 2017.”

Group chief executive Stuart Gulliver said targeted investment, prudent lending and its diversified, universal banking business model helped HSBC achieve revenue growth in a difficult market environment.

“We made a good start in implementing the plans that we announced at our Investor Update in June. Delivering against these plans remains our primary focus.”

HSBC declared a fourth interim dividend of $0.21 per share, taking the total dividend for the year to $0.51.

“While we see HSBC as a risk-off proxy (outperforming falling markets and vice-versa), these results highlight earnings pressures driven by revenues as well as continuing pressures on operating leverage,” investment bank Nomura noted on Monday.

“We are currently c6% below 17E revenues and PBT before FY15 results, and therefore expect consensus to catch-up while seeing downside risks to our estimates due to the macro-economic environment.”

The bank also confirmed the US Securities and Exchange Commission is investigating HSBC among multiple financial institutions over its hiring practices.

The investigation centres on the hiring practices of candidates referred by or related to government officials or employees of state-owned enterprises in Asia-Pacific.