Global banking giant HSBC on Monday reported a shock pre-tax loss in the last quarter of 2015 with results for the year missing analysts’ expectations, as the bank grapples with “seismic shifts” in the world economy.
HSBC last year announced a radical overhaul of its business to cut costs that included shedding 50,000 jobs worldwide, exiting unprofitable businesses and focusing more on Asia.
Like many global banks, HSBC is combating turmoil in global financial markets that has seen stocks and commodities plunge, while stricter regulations have driven up costs.
Still, last week Europe’s largest bank said it would keep its headquarters in London, despite concerns about growing regulation in Britain and an upcoming vote on whether it could leave the EU.
Net profit for 2015 dropped 1.2 percent to $13.52 billion from the previous year, HSBC said in a filing Monday, while pre-tax profit of $18.9 billion missed analysts’ forecast of $21.8 billion.
Group chairman Douglas Flint described the performance as “broadly satisfactory” in a statement.
But shares slumped after the news, falling 1.8 percent in Hong Kong.
Analysts were troubled by news the bank swung to a $858 million pre-tax loss in the last quarter, compared to a $1.95 billion profit forecast from a Bloomberg News survey.
“We didn’t expect they would report a (quarterly) loss,” said financial analyst Jackson Wong of Simsen Securities.
“I think it has to do with oil and commodity related losses,” he added, saying there had been little explanation from the management.
CEO Stuart Gulliver said in a statement Monday that cost-reduction measures were “already having an impact”.
“HSBC is now a leaner business,” he added.
But he admitted plans to sell HSBC’s Turkey business announced as part of the cuts had been put on hold after the bank failed to find any buyers.
“We have received a number of offers for our business in Turkey since June, none of which were deemed to be in the best interests of shareholders,” Gulliver said.
“We have therefore decided to retain and restructure our Turkish operations.”
China focus
Flint said China‘s slower economic growth would create a “bumpier financial environment” in 2016, but the bank would continue to focus on the world’s second-largest economy as it becomes more consumer orientated.
“This transition is driving our focus on the Pearl River Delta as a priority growth opportunity, given its concentration of high-tech, research focused and digital businesses,” he said.
HSBC earlier this month decided to keep its headquarters in London after a 10-month review, but Flint last week told the BBC it could shift 1,000 jobs to Paris if Britain votes to leave the European Union in June.
“If we were to leave and if there were to be restrictions ultimately on the renegotiation of Britain’s position, we have the ability to move activity and people between London and Paris,” he said.
HSBC began its review of where to put its headquarters in April last year, two weeks before a British general election, amid growing calls for a crackdown on the financial sector seen by many voters as feckless.
It cited as a reason for the review the British bank levy introduced in 2010 — a tax based on the size of any British-based banks’ global balance sheet, which has since been scaled down.
Hong Kong was the main contender to become the new headquarters, but in its announcement of the decision to stay put, HSBC described London as “ideally positioned” to remain its home base.
It made no reference to growing fears in Hong Kong that the city’s freedoms are being eroded by an increasingly influential China, a trend observers say could damage its status as a freewheeling finance hub.
