HSBC Holdings Share News (HSBA)

LONDON (Alliance News) - HSBC Holdings was among the worst blue-chip performers midday Tuesday, down 2%, after the shares of the biggest London-listed bank by market capitalisation had initially spiked upward on its report of higher first-quarter pretax profit.

The profit increase was driven by HSBC's investment banking division and its Asian operations, but pressure on returns remained as the group continues its restructuring.

Numis analyst Mike Trippitt said HSBC's headline figures came in ahead of the broker's forecasts, but he has concerns about its Commercial Banking performance and common equity tier one ratio.

In a statement, HSBC said it made a USD7.06 billion pretax profit in the quarter ended March 31, compared with USD6.79 billion in the corresponding quarter of the prior year. The figure came in above Numis' estimate of USD7.0 billion, and well ahead of the market consensus of USD5.8 billion.

Its first-quarter dividend remained at USD0.10.

Net interest income, which is the difference between the interest received on assets and that paid out on liabilities, fell by 6% to USD8.27 billion, while net fee income was down by 9% to USD3.68 billion. Those declines were partly offset as net trading income increased by 14% to USD2.58 billion.

Results were bolstered by net income from financial instruments designated at fair value, which increased to USD1.60 billion from USD508 million, while gains less losses from financial investments were up to USD647 million from USD184 million. Net earned insurance premiums fell to USD2.98 billion from USD3.14 billion.

Operating profit increased to USD6.48 billion from USD6.23 billion, as impairment charges for bad loans and credit risk fell to USD570 million from USD798 million, and net insurance claims and benefits paid and movement in liabilities to policyholders increased to USD4.23 billion from USD3.34 billion.

Commercial Banking pretax profit fell to USD2.28 billion in the first quarter, from USD2.42 billion in the same period in 2014.

The group's CET1 ratio increased slightly to 11.2% from 11.1% in the fourth quarter.

However, first-quarter return on average shareholders' equity fell to 11.5% from 11.7%, demonstrating the pressure on returns at the group, which is fresh from reporting its lowest such annual return on equity since the global financial crisis. Return on equity fell to 7.3% in 2014, compared with 9.2% in 2013, the lowest seen since the low-single digits reported in 2008 and 2009.

HSBC Chief Executive Stuart Gulliver said the group recovered well after a tough final quarter of 2014, citing the "usual strong start" for its investment bank, which was helped by its markets business. The CEO said the commercial banking business performed particularly well in the UK and Hong Kong, while the principal retail banking and wealth management arm generated higher revenue. He said the fall in loan impairment charges was particularly visible in Europe and North America.
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Markets: London shares are trading higher at midday despite selling in the mining sector, with investors preparing for Thursday's UK General Election. US stock futures point to a soft open, with the DJIA indicated down 0.1% and the S&P 500 and Nasdaq 100 both down 0.2%.

FTSE 100: up 0.4% at 7,012.73
FTSE 250: up 0.6% at 17,563.75
AIM ALL-SHARE: flat at 753.05
GBP: slightly up at USD1.5136
EUR: down at USD1.1137
GOLD: up at USD1,191.81 an ounce
OIL (Brent): up at USD66.98 a barrel
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Other Top Corporate News
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Glencore said production grew year-on-year across all of its commodities in the first quarter of 2015, but some segments saw production fall from the previous quarter. The natural resources company said own-sourced zinc production was up 16% year-on-year to 356,200 tonnes, driven by the expansions at Lady Loretta and McArthur River. However, some temporary downtime at McArthur River and lower grades at the Kazzinc, Matagami and Rosh Pinah mines resulted in production falling by 8% quarter-on-quarter. Own-sourced copper production was the only segment to experience a year-on-year fall in the first quarter, dropping 9% to 350,700 tonnes.
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Aberdeen Asset Management said it is returning surplus capital to shareholders as net outflows in the first half of its financial year were "cushioned" by rallying markets. In a statement, the asset manager and FTSE 100 constituent said assets under management grew to GBP330.6 billion from GBP324.4 billion between September 30, 2014 and March 31, 2015. Net outflows amounted to GBP11.30 billion over the six months, with GBP6.50 billion of that amount coming in the second quarter. Market movement and performance more than offset the net outflows, adding GBP13.5 billion to assets under management. Positive currency fluctuations amounted to GBP4.0 billion.
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Drinks company Diageo is considering selling parts of its wines division amid growing investor concern about the performance of the division, Sky News reported on Sunday. Sky said sources close to the company understand Diageo, which makes the Guinness stout and Smirnoff vodka brands, is examining plans to sell some of its wine brands, which include Blossom Hill and Sterling Vineyards, following approaches made by unidentified suitors.
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Barclays is preparing to sell a GBP2 billion package of second-charge mortgages and loans made via its Firstplus brand, more than a decade after it first floated plans to dispose of the subsidiary, the Financial Times reported. Barclays has been in talks with a number of new banks, which the newspaper did not name, in recent weeks about selling the portfolio, according to sources close to the situation. The GBP2 billion business, acquired as part of the takeover of Woolwich in 2000, was moved to Barclays' non-core arm in May and has not issued any new loans for six years.
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The logo of online telecommunication service Skype could be confused with a trademark registered by broadcaster Sky, an EU court ruled, backing a complaint brought by the London-listed group. Sky, which is best known for its pay-TV services, had filed a trademark in 2003 for a range of audiovisual and online products, before Skype applied to register its name for identical goods and services in 2004 and 2005. The broadcasting giant subsequently complained to the EU's trademark watchdog, the Office for Harmonisation in the Internal Market, arguing that there was a likelihood of confusion between the two brands.
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Indivior said its pretax profit in the first quarter fell on the back of weaker net revenue and higher selling and marketing costs, but the company said its RBP-7000 product has met the primary and secondary endpoints in its phase 3 trial for the treatment of schizophrenia. The pharmaceutical company said its pretax profit in the first quarter was USD102 million, compared to USD165 million a year earlier. Net revenue for the company fell to USD251 million from USD281 million a year earlier, while selling, distribution and administrative expenses rose to USD92 million from USD77 million, and research and development spending rose to USD20 million from USD16 million.
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Pub operator Greene King said its like-for-like sales grew in the first 51 weeks of its financial year, boosted by a good Easter and Valentine's Day, while revenue from its tenanted pub business also grew. Greene King said like-for-like sales in the 51 weeks to April 26 rose 0.4%, adding that the like-for-like sales would have been 0.8% higher excluding the impact of drink-driving regulations in Scotland. The group added like-for-like sales over the Easter period rose by 2.4% and said it had record sales over Valentine's Day. Greene King added that a decision is expected from the UK Competition and Markets Authority on its takeover of Spirit Pub Co on May 11.
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Online takeaway operator Just Eat said its orders surged in the first quarter, with total orders boosted by its French and Mexican businesses, though like-for-like orders also boomed. The FTSE 250-listed company said its total orders in the quarter to the end of March rose 51% year-on-year, driven by orders from the Alloresto.fr business in France, consolidated into Just Eat in July last year, and from its Mexican business, which it acquired in February. Like-for-like orders, excluding these changes to the business, also rose by 47%.
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Kennedy Wilson Europe Real Estate said it has acquired a non-performing loan secured on a site in Ilford in London for GBP68.5 million. Kennedy Wilson said it has acquired the loan from an unnamed financial institution. It is secured against the freehold interest in Pioneer Point in Ilford, a mixed-use development comprising 184,000 square feet of residential accommodation, plus a three-story block of retail space. Kennedy Wilson will pay GBP68.5 million for the loan, which has an unpaid principal balance of GBP149 million. It said the purchase price is materially below the replacement cost of the property.
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Ophir Energy said it has signed a binding heads of terms for a midstream chartering and operating services agreement with Golar LNG for a project in Block R in Equatorial Guinea, and said the initial capital expenditure needed has fallen by USD200 million. The FTSE 250 oil and gas company said it signed the agreement with Golar LNG after holding discussions with GEPetrol, Ophir's partner on Block R. GEPetrol is expected to formally ratify the agreement next week, said the company in a statement. The agreement outlines the "key commercial terms" for Golar to build, operate and maintain the floating liquefaction and storage vessel and related facilities on the Ophir-operated Fortuna floating liquefied natural gas project in Block R. The commercial terms were not revealed.
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Residential property company Grainger said it has agreed a deal to sell its interest in the New Sovereign Reversions Ltd portfolio for GBP18.5 million. FTSE 250-listed Grainger said it has agreed to sell its 50% stake in the portfolio, a joint venture with Moorfield Real Estate Fund II, to an affiliate of private equity group Lone Star Funds.
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Irish budget carrier Ryanair Holdings said its traffic rose by 16% in April and said its load factor improved by seven percentage points. Ryanair said traffic in the month rose to 9 million compared to 7.8 million a year earlier, with its rolling traffic to the end of April up by 12% to 91.8 million customers. The carrier added its load factor improved in the month to 91%, up from 84% in April last year.
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AIM Movers
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Red Emperor Resources, up 52%. The company said its partner on the Block SC55 project in the Palawin Basin offshore the Philippines has signed a contract for a drill ship to conduct work on the site. Otto Energy Ltd has signed the deal with Maersk Drilling to secure the Maersk Venturer ultra-deepwater drill ship, which will drill the Hawkeye-1 exploration well at the site. Ferrum Crescent, up 38%. The company said it has signed a memorandum of understanding with South African investment company Principle Monarchy Investments Ltd to sell a 39% stake in the Moonlight Iron project in South Africa. The sale will be conducted via a placing of shares in Ferrum Iron Ore Ltd, a 97%-owned subsidiary of Ferrum Crescent which owns the Moonlight project. DekelOil, up 33%. The company said total crude palm oil production from its project in the Ivory Coast has already exceeded total production for 2014.

Taihua, off 15%. The China-based pharmaceutical products company warned that it expects its Forsythia harvest to be smaller than in previous years due to poor weather conditions to date, although it is "too early" to tell what the actual affect on the harvest will be. Northcote Energy, down 13%. The company said it has conducted a placing to raise GBP2.8 million to pursue investment opportunities in the Mexican energy sector and said it is currently evaluating a number of opportunities including one with its existing joint venture partner in the country. Stellar Resources, down 12%. UK Oil and Gas Investments reiterated that the company has not completed sufficient work on the Horse Hill license area near Gatwick Airport to comment on the amount of oil in place, following an Evening Standard newspaper report quoting its chairman as placing a 100 billion barrel figure on the asset.
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Top Economics And General
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British construction sector expansion slowed for a second month in a row in April, marking the weakest pace in nearly two years, amid sluggish output and new order growth, survey data from Markit Economics revealed. The Markit/CIPS UK Construction Purchasing Managers' Index fell sharply to 54.2 from 57.8 in March. Economists had forecast a modest drop to 57.4. A PMI reading above suggests growth in construction activity. The pace of expansion slowed to a 22-month low in residential building activity, even though it was the best performing area of construction output during April.
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Bargaining between political parties is set to get underway as the UK election campaign enters its final two days, with Labour facing questions about the legitimacy of its claim to govern should it win fewer seats than the Tories and ongoing questions raised by the Tories about Labour's potential reliance on the Scottish National Party. Senior figures within the Labour party are understood to be attempting to woo the Liberal Democrats in order to "lend legitimacy" to a minority Labour government and cut the party's reliance on the SNP, according to a report in The Daily Telegraph. The newspaper said the talks with the Lib Dems indicate Labour is already privately acknowledging it will not win enough seats to secure a majority.
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The Conservatives and Labour appeared to be in a deadlock two days ahead of the UK General Election, with two separate polls putting the parties in a dead heat, while another indicated tactical voting by Tories is set to result in Liberal Democrat leader Nick Clegg retaining his seat. The Tories and Labour are tied in the daily YouGov/The Sun poll on Tuesday, with both parties at 33%. The ComRes/Sunday Mirror poll has exactly the same result as the YouGov survey, with the two main parties tied at 33%.
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Greek officials embarked upon a diplomatic tour de force ahead of deadlines for two payments to the International Monetary Fund in the country's ongoing debt crisis. Finance Minister Yanis Varoufakis met his French counterpart, Michel Sapin, with a meeting with EU Economy Commissioner Pierre Moscovici expected later. Separately, European Central Bank chief Mario Draghi was set to meet two Greek officials in Frankfurt - Deputy Prime Minister Yannis Dragasakis and Chief Economic Spokesman Euclid Tsakalotos. Athens faces two payments to the IMF in the coming days totalling almost EUR1 billion - one on Wednesday and one on May 12.
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The eurozone economy will grow more than expected this year, the European Commission said in a new forecast, that still, however, painted a grimmer picture for long-struggling Greece. The euro currency bloc emerged from recession in the second quarter of 2013, but has struggled with sluggish growth, high unemployment, low inflation and, more recently, fresh financial worries in Athens. It has gotten a recent boost, however, from low oil prices, the euro's depreciation and a new monetary stimulus plan from the European Central Bank.
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Eurozone producer prices declined as expected in March, figures from Eurostat showed. The producer price index fell 2.3% year-over-year in March, slower than previous month's 2.8% decrease. The figure was also matched with economists' expectations. Excluding energy, producer prices dropped 0.5% in March from the previous year and energy prices alone plunged by 6.8%.
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The Reserve Bank of Australia lowered its benchmark interest rate by a quarter point as widely expected by economists. The policy board of the RBA led by Governor Glenn Stevens decided to cut the cash rate by 25 basis point to 2.00%, effective May 6. The board said the inflation outlook provided the space for monetary policy further. This was the second reduction this year. The bank last reduced the rate by 25 basis points in February.
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US Federal Reserve Bank of Chicago President Charles Evans is reluctant to raise interest rates after data confirmed the economy hit a rough patch for the second winter in a row. "Economic activity appears to be on a solid, sustainable growth path, which, on its own, would support a rate hike soon," Evans said in remarks prepared for a speech Monday in Columbus, Indiana. "However, the weak first-quarter data do give me pause, and I would like to see confirmation that they are indeed a transitory aberration," he added. "I likely will not feel confident enough to begin to raise rates until early next year."
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Afternoon Watchlist (all times in BST)

G8 Meeting
13:30 US Trade Balance
13:30 Canada International Merchandise Trade
13:55 US Redbook index
14:45 US Markit PMI Composite
15:00 US IBD/TIPP Economic Optimism
15:00 US ISM Non-Manufacturing PMI
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Wednesday's UK Corporate Events

J Sainsbury - Full Year Results
Imperial Tobacco Group - Half Year Results
IAG - April Traffic Statistics
Legal & General Group - Q1 Interim Management Statement
GlaxoSmithKline - Q1 Results
CRH - Interim Management Statement
Direct Line Insurance Group - Q1 Interim Management Statement
Carillion - Interim Management Statement
JD Wetherspoon - Q3 Interim Management Statement
Sage Group - Half Year Results
Supergroup - Q4 Results
National Express - Q1 Interim Management Statement
GKN - Interim Management Statement
Intu Properties - Trading Statement
DS Smith - Trading Statement
NCC Group - Interim Management Statement
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Wednesday's Key Economic Events (all times in BST)

All Day Japan Constitution Day (observed)
01:00 US Fed Minneapolis's Narayana Kocherlakota speech
02:45 China HSBC China Services PMI
06:00 Ireland Services PMI
08:00 EU Non-monetary policy ECB meeting
08:45 Italy Markit Services PMI
08:50 France Markit Services and Composite PMI
08:55 Germany Markit Services and Composite PMI
09:00 EU Markit Services and Composite PMI
09:30 UK Markit Services PMI
10:00 EU Retail Sales
12:00 US MBA Mortgage Applications
13:15 US ADP Employment Change
13:30 US Nonfarm Productivity and Unit Labor Costs Preliminary
15:00 Canada Ivey Purchasing Managers Index
15:30 US EIA Crude Oil Stocks
18:30 US Fed's Lockhart speech
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By Tom Waite; thomaslwaite@alliancenews.com; @thomaslwaite

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