HSBC reports larger-than-expected drop in profits

4th Aug 2014 10:20

Emerging markets focused lender HSBC saw reported profits before tax drop 12% during the first six months of the year to reach $12.34bn (£7.33bn). Investors however seemed to be choosing to focus on the prospect for profits to benefit from the upturn in the global interest rate cycle.The consensus estimate was for $12.9bn in profits.The return on average shareholders' equity decreased by 1.3 percentage points to 10.7%.HSBC's revenues decreased 4% to $31.359bn (£18.64bn), mainly due to the absence of the extraordinaries which boosted income last year. Excluding their impact revenues were largely unchanged. First-half operating expenses rose 2% to $18.240bn. Underlying operating expenses grew 4%, in part reflecting increased investment in risk, compliance and global standards.On a more positive note, loan impairment charges and other credit risk provisions decreased to $1.84bn (£.1.1bn) from $3.1bn (£1.84). The CRD IV common equity Tier-1 capital increased to 11.2% at the mid-year mark, up from 10.8% at year-end 2013.Commenting on the results Stuart Gulliver, group chief executive, said: "These results demonstrate the resilience of our business model. Whilst regulatory uncertainty persists, our balance sheet remains strong and our continuing ability to generate capital supports both growth and our progressive dividend policy."The first half dividend per share has been maintained at 20p.Regarding its outlook, HSBC highlighted the "broadly positive" outlook for the majority of its home and priority markets, particularly for the UK. Of special importance, the bank emphasised the fact that the projected rise in interest rates in the UK and US, given its commercial surplus, has positive implications for its revenues. As of 10:19, the stock was up 0.6% at 633.11p.AB