HSBC welcomes François Hollande's first steps – but with caution

The HSBC chief executive Stuart Gulliver said he remained "sanguine" about the prospects of France being run by its new President, François Hollande.

Mr Gulliver is the first major UK chief executive to discuss having a socialist running the Élysée Palace. He said: "[Mr Hollande's] initial remarks appear to be quite constructive about Europe. It remains to be seen what the results of moving away from core austerity might be."

HSBC has a major presence in France, so Mr Gulliver was understandably cautious on the issue. However, he said British banks had prepared contingency plans for the break-up of the eurozone or specific countries leaving it, as fears mounted for the single currency.

"The Financial Services Authority has required UK banks to look for some time at a eurozone dislocation, and we have been part of that," added Mr Gulliver. "This includes hedging exposures to credit risk in those countries most under pressure. It also requires us to put in place operational strategies for dealing with any changes on the ground."

Mr Gulliver said he believed HSBC's exposure to Greece, Ireland, Italy, Portugal and Spain was "quite manageable". The sovereign debt exposure came down from $4.7bn (£2.9bn) to $4.4bn over the past three months, while exposure to other banks in those countries rose by $400m to $8.6bn. "Markets have not really reacted to the French election because it had already been discounted in prices," he said. "Certainly in HSBC, April investment banking remained satisfactory." HSBC reported a strong first quarter, with pre-tax profits – after excluding the accounting change caused by moves in the value of its own debt – rising by 25 per cent to $6.8bn. Like its peers, the bank saw a strong improvement in investment banking returns.

Other areas of good growth were commercial and retail banking as well as in emerging markets, including Hong Kong, the rest of Asia-Pacific and Latin America.

Mr Gulliver continued to take costs out of the business. The number of employees fell by 3,000 in the first quarter, and is down 14,000 compared with a year ago. The bank has sold off another 11 non-core businesses in the Past three months, taking the total number of disposals since Mr Gulliver's elevation to 27.

In the UK, HSBC upped its provisions for mis-selling payment protection insurance by £290m to £745m. Mr Gulliver admitted: "I honestly can't say this will be the final provision. I doubt it will be but we are being very prudent."

The profit figures beat City forecasts with many analysts saying the company was making good progress with cost-cutting.