Higher costs dent HSBC profits

9th May 2011 09:40

Global banking leviathan HSBC saw first quarter profits slide as it faced revenue headwinds in its Global Banking and Markets division.Net operating income before loan impairment charges and other credit risk provisions dropped to $17.04bn from $17.93bn the year before. Japanese broker Nomura Securities had forecast little year on year change in revenues.Loan impairment charges narrowed to $2.38bn from $3.79bn a year earlier as economic conditions stabilised and the group reduced portfolio risk and improved collections. Reported profit before tax slipped to $4.91bn from $5.71bn in the first quarter of 2010, while underlying profit before tax retreated to $5.50bn from $6.10bn.Nomura had forecast first quarter profit before tax of $6.1bn.Costs in the first quarter included a $440m provision in respect of the adverse judgement in the Judicial Review relating to sales of payment protection insurance (PPI) in the UK. A couple of hours before HSBC released its trading update UK peer Barclays had set aside £1bn to cover potential claims arising from mis-selling of PPI policies, while last week Lloyds Banking made a PPI-related provision of £3.2bn.Profit after tax jumped to $4.42bn from $2.90bn the year before. Diluted earnings per share improved to 22 cents from 15 cents a year earlier. The first quarter dividend has been edged up to 9 cents from 8 cents the year before."We were profitable in all regions and customer groups, profits increased in each of our faster-growing regions and credit quality improved. There was double-digit revenue growth in many of our businesses in the faster-growing regions. We continued to increase customer lending in all regions, except North America, with strong growth in Asia and Latin America," said group chief executive, Stuart Gulliver."Set against this, as expected, we faced revenue headwinds in Global Banking and Markets, notably in Balance Sheet Management, and in the US, where we continued to run off the Consumer Finance portfolios and Card balances reduced," Gulliver added. April's performance was described as "satisfactory" by Guliver, and was in line with expectations.---jh