LONDON (Alliance News) - HSBC Holdings PLC on Monday reported an increase in interim profit and revenue thanks to growth in all of its global businesses and despite rising restructuring and legal provisions.
Shares in the FTSE 100-listed bank were down 0.5% Monday at 712.50 pence each.
For the six months ended June, pretax profit rose 4.6% to USD10.71 billion from USD10.24 billion the year prior. HSBC attributed the profit growth to positive currency movements and favourable movements in significant items such has gains from disposals.
On an adjusted basis, the lender posted pretax profit of GBP12.14 billion, down 1.8% from GBP12.36 billion.
Despite a rise in revenue growth and lower expected credit losses, higher operating expenses - GBP17.55 billion from GBP16.44 billion - led to a fall in adjusted pretax profit. The bank's legal provision costs totaled GBP841 million in the interim period.
The increase in operating expenses reflected HSBC's investments in its own business - particularly Retail Banking & Wealth Management and Global Banking & Markets.
The FTSE 100 listed bank's revenue increased 4.3% to USD27.29 billion from USD26.16 billion the year before.
Revenue performance was driven by growth in all of the Asia-focused bank's global businesses. This was mainly due to deposit margins and balance growth as well as the effects of currency tailwinds, it said. Excluding currency effects, revenue rose 2.1%.
The bank's common equity tier one ratio stood at 14.2% at period end, compared to 14.5% six month earlier. Loans advanced to customers rose 1.1% to USD973.44 billion from USD962.96 billion six months earlier.
The bank's Commercial Banking business now represents 33.9% of the company's revenue. A 15% increase in the unit's revenue to GBP4.11 billion from GBP3.56 billion in the half was supported by transaction banking capabilities.
HSBC said a positive interest rate environment and benefits of past investment helped the commercial banking unit to grow lending and deposit balances, particularly in Asia and the UK.
The bank's revenue from Asia grew to 87.6% of the bank's total revenue in the half, from 74.5%. The 23% increase to GBP9.38 billion from GBP7.63 billion came despite "rising concerns around the future of international trade and protectionism".
The bank remains "cautiously optimistic" about its ability to continue its global growth.
HSBC declared a second interim dividend of USD0.10 per share, flat on the year before.
"We are taking firm steps to deliver the strategy we outlined in June," HSBC Chief Executive Officer John Flint said. "Today's results, which are in line with our expectations, show strong revenue growth in our global businesses. This is creating room to invest while maintaining our commitment to full-year positive adjusted jaws. We are investing to win new customers, increase our market share, and lay the foundations for consistent growth in profits and returns."
In June, Flint described a strategy in which the banking group would return to "growth mode" following a 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".
The jaws ratio - a key financial performance indicator - is the difference between the percentage growth in income and the percentage growth in expenses.
For the interim period, return on tangible equity stood at 9.7% and the jaws ratio at negative 5.6%.
HSBC also plans to "sustain" dividends at current levels and engage in share buybacks where "appropriate" as well as intending to retain CET1 solvency ratio above 14%.
In order to achieve this, HSBC is targeting mid-single digit revenue growth combined with a low to mid-single digit growth in operating expenses.
HSBC also announced Jonathan Symonds has been appointed group deputy chairman, effective immediately. He will leave his role as chairman of unit HSBC Bank PLC Monday.
HSBC Holdings (HSBA)