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LONDON (Alliance News) - FTSE 100-listed banking giant HSBC Holdings PLC on Tuesday reported strong growth in all of its global units, but missed profit consensus, with particularly strong growth in Asia allaying fears that the US's trade war with China could hurt HSBC's top-line growth.
In 2018, pretax profit widened 16% to USD19.89 billion from USD17.17 billion the year prior. This was after revenue rose 4.5% to USD53.78 billion from USD51.45 billion the year before.
The reported pretax profit fell short of market expectations. Analyst consensus saw HSBC achieving pretax profit of USD20.93 billion. HSBC shares were down 1.5% in Hong Kong trading.
The bank's net interest income for 2018 came in at USD30.44 billion slightly below consensus. HSBC's net operating income of USD52.17 billion was below consensus of USD54.59 billion.
"These are good results that demonstrate progress against the plan that I outlined in June 2018," HSBC Chief Executive Officer John Flint said.
In June 2018, newly appointed Flint described a strategy in which the banking group would return to "growth mode" following its period of restructuring.
By 2020, HSBC is targeting a return on tangible equity of more than 11% under this new strategy. It also plans to invest between USD15 billion and USD17 billion dependant on "achieving positive adjusted jaws each financial year".
"Profits and revenue were both up despite a challenging fourth quarter, and our return on tangible equity is significantly higher than in 2017," Flint added. "This is an encouraging first step towards meeting our return on tangible equity target of more than 11% by 2020."
Return on tangible equity stood at 8.6% in 2018, wider than the 6.8% reported in 2017.
Adjusted jaws in 2018 fell to negative 1.2% due to lower adjusted revenue in the fourth quarter of 2018. This was due to "weakness in markets" but HSBC said it remained commitment to the "discipline of positive adjusted jaws."
The jaws ratio - a key financial performance indicator - is the difference between the percentage growth in income and the percentage growth in expenses.
The CET1 solvency ratio for HSBC in 2018 stood at 14.0%. Marginally below consensus of 14.1%.
HSBC ended 2018 with USD865.3 million in risk-weighted assets, higher than consensus of USD871.3 million.
Within divisions, HSBC's Retail Banking & Wealth Management unit increased its adjusted pretax profit by 9.3% to USD7.08 billion. The bank's Commercial Banking unit increased profit by 12% to USD7.67 billion.
HSBC's maligned Global Banking & Markets unit increased adjusted pretax profit by 3.9% to USD6.08 billion. The unit holds HSBC's investment bank which has been criticised in the past few years.
In Asia - where HSBC generates most of its profit - saw a 16% rise pretax profit to USD17.79 billion.
For the fourth quarter, HSBC held its dividend unchanged at 21 US cents per share. For the full year, the dividend was also unchanged at 51 cents with the firm "confident" of maintaining the dividend at this level in the future.
"HSBC is in a strong position," Chair Mark Tucker said. "Our performance in 2018 demonstrated the underlying health of the business and the potential of the strategy that John Flint, our Group Chief Executive, announced in June."
"Despite a challenging external environment in the fourth quarter, all of our global businesses delivered increased profits and the group achieved a higher return on tangible equity in 2018," Tucker added. "Asia again contributed a substantial portion of the group's profits, notably in Retail Banking & Wealth Management and Commercial Banking."
HSBC said it has made a "good start" to 2019, with January ahead of the lender's own expectations, but noted the "softening" credit performance in the UK. HSBC also noted it is continuing its Brexit preparation, believing its French operations give it a "major advantage".
"Despite more challenging market conditions at the end of the year and a weaker global economic outlook, we are committed to the targets we announced in June. We remain alert to the downside risks of the current economic environment, especially those relating to the UK economy, global trade tensions and the future path of interest rates. We will be proactive in managing costs and investment to meet the risks to revenue growth where necessary, but we will not take short-term decisions that harm the long-term interests of the business," added CEO Flint.
