HSBC beats forecasts as first-quarter profits hit $7.1bn, CEO fires bank levy warning

5th May 2015 09:42

First-quarter profits and earnings from HSBC beat market expectations as the bank recovered well from a difficult end to 2014, but said the dividend was coming under pressure from the UK bank levy.Speaking to journalists and analysts on Tuesday, chief executive Stuart Gulliver warned "it's impossible for bank to stick to progressive dividend policy" due to the bank levy.Following on from the company's politically piquant comments that the bank could move its headquarters out of London, which had largely been dismissed by analysts, Gulliver said management would decide on a move soon."It's going to take us a few months, not years [to make a decision on a review]," he said.The bank clarified that the UK bank levy, which has been hiked nine times, was a principal reason to leave UK.When asked by analysts whether Hong Kong could handle hosting a bank the size of HSBC, Gulliver said that the Hong Kong market authorities already regulated its Asian business, which is around 70-80% of the total.He promised a decision on the corporate headquarters move from the UK by the end of year, but said it would need to be decided by a shareholder vote.Gulliver, who at a 9 June strategic update is expected to announce cuts to the investment bank and a retreat from key emerging markets such as Brazil and Turkey, added that it was "way too early" to say if the UK high street bank will be floated off.Gulliver's straight talking saw HSBC's shares snap back to be down 1.9% to 634p by 12.15 on Tuesday.The results themselves had impressed the markets before these comments.On adjusted revenue slightly lower than forecast at $15.4bn, HSBC's reported pre-tax profits of $7.1bn were 4% up on the same period last year and more than a fifth higher than City forecasts.Earnings per share came in at $0.26, higher than the $0.22 consensus estimate. A dividend of $0.10, unchanged from last year's, was also announced.Write-offs were much lower than the same period in 2014, with regulatory provisions of £139m, UK customer redress programmes at £137m and restructuring costs of £43m.On an adjusted basis, PBT was 5% higher than in the first quarter last year, primarily driven by higher revenue and lower loan-impairment charges (LICs) that were only partly offset by higher operating expenses.Gulliver, who last month admitted said: "Our business recovered well in the first quarter following a difficult fourth quarter of 2014."Global Banking & Markets had its usual strong start to the year, with a notable increase in year-on-year revenue in our markets businesses."Gulliver hailed a continued good performance from commercial banking, particularly in the UK and Hong Kong, and increased revenue at the retail banking and wealth management arm, which it was recently rumoured could be partially sold off if the company headquarters are moved out of the UK."Loan impairment charges were significantly lower compared to the same period in 2014, particularly in Europe and North America," he added.Although adjusted operating expenses increased, as expected, management continued to drive cost-saving plans that are hoped to deliver results over the remainder of 2015 and beyond.Net interest margin, a key banking measure of profit, was largely unchanged year-on-year, while the bank's capital base was slightly improved, with the common equity tier one ratio lifted one percentage point over the last three months to 11.2% at the end of March.The bank was vilified last year after its Swiss arm was found to have helped clients dodge tax, with last year's falling profits and underperforming shares a greater concern to investors.Gulliver later told reporters and analysts that the revelations had had very little impact on HSBC's private banking performance but have "had an impact on the sense of pride" of staff working for the bank.