HSBC posts surprise profit gain as bank stems revenue drop

London - HSBC posted a surprise increase in first-quarter profit after chief executive officer Stuart Gulliver stemmed the revenue decline that’s dogged his six-year tenure. The bank’s shares rose in Hong Kong.

Adjusted pretax profit, which excludes one-time items, rose 12% to $5.94bn, the London-based lender said in a statement on Thursday.

Adjusted revenue rose 2%, compared with the 9% drop forecast by analysts, bolstered by growth at its three biggest businesses.

“I’d be a happy man if I could close out 2017 right now,” Finance Director Iain Mackay said in an interview with Bloomberg Television after the results were reported. He played down the prospect of more stock buybacks on top of the $3.5bn of purchases HSBC made in the past eight months to bolster its share price.

Gulliver, in what may be his final full year in charge of Europe’s biggest lender, has exited almost 100 businesses and 18 countries - moves that have taken a toll on revenues - while enduring several costly misconduct scandals. The bank has recruited Mark Tucker to succeed Douglas Flint as chairman in October, giving the head of insurer AIA the task of galvanizing growth and finding a new CEO. 

HSBC shares in Hong Kong gained 1.8% to HK$65.60 as of 08:24, the highest intraday level since February 22. The share buybacks have helped its London stock climb 45% in the past year, and some analysts had been hoping for an update on the prospect of further purchases.

“I certainly wouldn’t encourage investors to think that we’re going to do buybacks every quarter,” Mackay said.

Key first-quarter figures announced by HSBC:

Adjusted revenue rose 2% from a year earlier to $12.8bn Adjusted expenses increased 2.7% to $7.2bn  Adjusted jaws -0.6%, indicating that costs rose faster than revenue Return on equity dropped to 8% from 9%. Common equity Tier-1 ratio, the key indicator of financial resilience, climbed to 14.3% from 13.6% at the end of 2016 Net interest margin rose to 1.64% from 1.6% in December

The adjusted pretax profit number reported by the bank beat the $5.3bn average estimate in a Bloomberg analyst survey.

“Our global businesses maintained their momentum from the end of 2016,” Gulliver said in the statement. “Our cost-saving programme remains on track to hit the higher cost-saving target we announced at our annual results.”

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