HSBC earnings soar 142 per cent in 2017

HSBC’s 2017 pre-tax profit rose 142 per cent as the lender avoided the multibillion-dollar restructuring costs that marred its 2016 results, but the profit growth lagged expectations as it took a writedown following US tax changes.

Europe’s biggest bank by market capitalisation reported on Tuesday a profit before tax for 2017 of $17.2 billion, compared with $7.1bn the year before and below the average estimate of $19.7bn, according to Reuters data based on forecasts from 17 analysts.

The failure to live up to analysts’ estimates marked a rare event in outgoing HSBC chief executive Stuart Gulliver’s seven-year reign.

It was an unusual miss for investors, too, who had got used to Mr Gulliver beating profit estimates, according to Bloomberg, at least in the latter part of his tenure. Mr Gulliver delivered higher than forecast adjusted net income in six of the previous seven quarters, according to data compiled by Bloomberg.

HSBC shares were down 2.2 per cent in afternoon Hong Kong trading after the results announcement.

It was Mr Gulliver’s last set of results before handing the reins to John Flint, an HSBC veteran who needs to maintain momentum as the bank tries to put years of restructuring and scandal behind it. Mr Gulliver spent much of his tenure shrinking the lender’s far-flung global network, exiting almost 100 businesses and 18 countries.

“As I prepare to pass on the stewardship of HSBC to my successor, I am proud of our achievements,” Mr Gulliver said. “After the most extensive transformation programme in HSBC’s 153-year history, HSBC is simpler, stronger and more secure than it was in 2011, and better able to connect customers to opportunities in the world’s fastest growing regions.”

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The analysts' 2017 estimates estimates did not all take into account the tax writedown, triggered by cuts in the US corporate tax rate which meant banks had to book losses on deferred tax assets they built up during loss-making times, Reuters said.

HSBC said in its earnings statement that its 2017 financial results include a charge of $1.3bn relating to the “remeasurement of US deferred tax balances” to reflect the reduction in the US federal tax rate to 21 per cent from 2018.

The bank’s year-ago profit figure reflected a $3.2bn impairment of goodwill in HSBC’s global private banking business in Europe and the impact of its sale of operations in Brazil.

HSBC’s reported revenues rose to $51.4bn from $48bn a year ago.

The banks’s net interest margin in the fourth quarter fell from a year earlier. HSBC attributed the decrease to lower yields on customer lending and margin compression in Europe and Asia.