HSBC's investment bank starts strongly but profits dented by FX

HSBC's profits in the first three months of the year were severely dented by currency movements but at the underlying level they improved strongly against the first and fourth quarter of last year.

Pre-tax profits at the reported level fell 19% to £4.96bn year-on-year, but if adjusted for one-off items and forex rose to $5.94bn, up 12% on last year and beating consensus forecasts of $5.3bn thanks to strong performances from three of the group's four businesses.

Top line sluggishness continued, with revenue of $13.0bn falling 13% mainly due currency effects and the sale of its Brazilian operations, but excluding those adjusted revenue was up 2% to $12.8bn.

Chief executive Stuart Gulliver, who is stepping down next year, said the investment bank, known as Global Banking & Markets, "had a great quarter", enjoyed growth from rates and credit.

The retail banking and wealth management arm benefited from rising interest rates and renewed customer investment appetite, with growth in Asia life insurance manufacturing and in current accounts, savings and deposits.

"Commercial banking delivered higher revenue from our liquidity and cash management activities," he said.

Adjusted operating costs were 3% higher, mainly due to a credit in the prior year relating to the 2015 UK bank levy.

"Excluding this, inflation and continued investment in our regulatory and growth programmes were partly offset by the impact of our cost-saving initiatives."

HSBC completed a $1bn buy-back last month and made progress on cost-saving programmes, which Gulliver said gave the board "further confidence in our ability to hit the higher cost-saving target that we announced at our annual results”.