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London - HSBC is expected to report an 11% fall in profit on Monday for the first half of this year, hurt by falling revenues in a pared down business and lower income from Latin America and investment banking at the start of the year.
HSBC's pre-tax profit fell 20% year-on-year in the first quarter and Europe's biggest bank, which operates across 75 countries, should make a second quarter pre-tax profit of about $5.7bn, similar to a year ago, underpinned by better margins in Hong Kong and growth in commercial banking profits.
But that will leave earnings in the first six months overall at $12.5bn, down from $14.1bn a year ago, according to the average of 15 analysts polled by the bank. Last year's profits were swelled by asset sales.
CEO Stuart Gulliver is in the second phase of a turnaround plan that began in 2011 to make the bank less complex, more efficient and able to deliver better returns and dividends for shareholders.
He has axed more than 40 000 jobs and sold or closed 60 businesses, which the bank said has delivered annual cost savings of more than $5bn.
But the asset sales have hurt revenues, which will be down about 9% to $31.3bn in the first half, according to analysts' forecasts.
A jump in spending on compliance has also limited the impact of the cost-savings, and first-half operating costs are expected to be $18bn, down 2% on the year.
Return on equity will still lag Gulliver's target level of above 12%; it was 11.7% in the first quarter.
HSBC's investment bank profit fell by a fifth in the first quarter but revenues in the second quarter should have improved on that, analysts said.
European investment banks have outperformed US rivals in the second quarter, and analysts said HSBC should extend that trend as it is less reliant on bond and interest rate trading, where activity has been depressed for more than a year.
HSBC's London-listed shares are down 5% this year, underperforming a flat European bank index.
