HSBC misses 2018 expectations yet wealth unit outperforms

Pedro Gonçalves
HSBC misses 2018 expectations yet wealth unit outperforms

HSBC reported lower than expected fourth-quarter profit today as markets globally experienced a sharp sell-off and the looming twin storms of Brexit and the long-running trade impasse between Washington and Beijing weighed on the international lender.

UK-headquartered HSBC Holdings Plc has reported a pre-tax profit of $19.9bn (£15.4bn) 2018, which, although was 16% higher than the previous year, disappointed analysts. Its wealth unit however registered an adjusted pre-tax profit of $7.08bn for the year ended 31 December 2018.  

The London-headquartered bank was expected to record a 23.8% jump in reported pre-tax profit to $21.26bn for 2018, according to forecasts compiled by Refinitiv. Revenue for the year was projected to be 6.28% higher at $54.674bn, data by Refinitiv showed.

We continue to prepare for the UK's departure from the EU"

The Retail Banking and Wealth Management arm of HSBC results mark an increase of 9% compared to $6.48bn in the previous year.

The unit's net operating income also increased, with a growth of 8% from $19.25bn to $20.76bn. Total operating expenses at the division was $13.71bn, up 7% on a year-on-year basis.

HSBC's Global Private Banking business posted adjusted pre-tax profit of $344m in 2018, a 16% increase from $296m a year earlier. The division grew its mortgage book in the UK and Hong Kong by more than $20bn. 

Chairman Mark Tucker highlighted a number of headwinds for the bank, including the US-China trade war.

"The financial targets that John announced in June remain appropriate, even as the global economic outlook becomes less predictable. Our ability to meet them depends on being able to help our customers manage the present uncertainty and capture the opportunities that unquestionably exist," he said.

CEO John Flint added: "These are good results that demonstrate progress against the plan that I outlined in June 2018. Profits and revenue were both up despite a challenging fourth quarter, and our return on tangible equity is significantly higher than in 2017. This is an encouraging first step towards meeting our return on tangible equity target of more than 11% by 2020."

With Brexit looming, HSBC followed the other major British financial giants in ring-fencing its UK banking operations in 2018. 

"We continue to prepare for the UK's departure from the EU", Flint said, adding that its operations in France "gives us a major advantage in this regard."