HSBC is off to a flier on results
Banking giant’s chief executive is racing ahead of schedule with his efforts to reduce costs
Saturday 04 May 2013
The first-quarter results from HSBC, Europe’s biggest bank by market value, may be only the hors d’oeuvre to its strategy day a week later but they will still make tasty reading.
Forecasts for first-quarter profit range widely with Deutsche Bank looking for $8.2bn (£5.3bn) pre-tax but $6.7bn on an underlying basis. Investec’s Ian Gordon is not far off with $6.6bn and Numis’s Mike Trippitt is looking for $7bn. All of those are improvements on the first quarter of 2012 when headline profit was $6.4bn.
Chief executive Stuart Gulliver, who took the top job at the start of 2011, is likely to confirm that the bank is finding growth harder to come by with its key Far Eastern franchise seeing a slowdown and the UK economy bumping along in a straight line.
For that reason investors’ focus, both at results and the strategy day, will be on costs. Only last week, HSBC axed another 3,100 UK jobs as it followed most of its rivals in cutting the amount of investment management advice it will give to all but the most wealthy clients.
Mr Gulliver has already exceeded the cost savings target he set in his first strategy review in May 2011. Then he set a target of $2.5bn to $3.5bn of cost cuts by the end of this year. But he had already delivered $3.6bn by the end of 2012. He could well get past the $4bn point by the end of 2013.
His pledge to simplify the bank and get out of those areas where it did not have a market-leading position or produced minimal profits has gone well. So far 52 businesses have been sold or closed including credit cards in the United States, the sale of its stake in Chinese insurer Ping An and the sale of its Panama operations for $2.1bn.
At the balance-sheet level HSBC has lifted its Core Tier One capital ratio to 12.3 per cent, which ranks it among the best-capitalised banks in the world.
Mr Gulliver is not expected to set himself and his management new targets in eight days’ time.
He will, however, emphasise how far ahead on its three-year plan HSBC is.
That may not be enough to excite investors. Or as Investec’s Ian Gordon headlined his last note: “Come on, baby, light my fire!” He reckons Barclays and Standard Chartered are better “buys”.
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