HSBC cost cuts set to lift profits as CEO faces growth challenge

* HSBC releases 2013 results at 0815 GMT on Monday

* Pretax profit seen rising 18 pct to $24.3 bln as costsfall

* Challenge for CEO Gulliver is to increase revenue-analysts

By Steve Slater

LONDON, Feb 23 (Reuters) - HSBC's profits areexpected to rise by almost a fifth to $24 billion for 2013 as itbenefits from a cost-cutting drive that spans managing itsdocuments more efficiently to telling staff to use businessclass air travel less.

Chief Executive Stuart Gulliver has sold or closed 60businesses, axed 40,000 jobs and taken a knife to costs sincetaking over three years ago, and last year's operating costs areexpected to tumble $5 billion from 2012 and lift profits.

Analysts expect Gulliver to keep a tight rein on costs andsaid his bigger challenge is to increase revenue at Europe'sbiggest bank by market value.

Economic growth in Asia has slowed and HSBC has lost incomeafter offloading its U.S. credit cards business and half of itsU.S. branch network, and selling its stake in Chinese insurerPing An, and Gulliver needs to show how to replace that.

He said in November economic growth in Hong Kong and Britainshould underpin its two core markets this year and he wasconfident China and the rest of Asia-Pacific will grow.

Analysts said any improvement in revenue prospects would godown well with prospective investors, especially manyinstitutions in Britain who will soon get a flood of cash fromthe $84 billion sale of mobile phone firm Vodafone's stake in Verizon Wireless.

"Some evidence of revenue momentum and capital accretion maybe met with a surprisingly robust increase in investor interest,particularly given the imminent receipt of substantial volumesof cash by Vodafone shareholders," said Deutsche Bank analystJason Napier.

HSBC's revenues last year are expected to be down about $2billion from 2012 to $66.4 billion, reflecting the lost incomefrom disposed businesses, weakness in some emerging marketcurrencies, and lower investment banking revenue. Revenues arecurrently forecast to grow by less than 1 percent this year.

HSBC, which has long been one of the world's bestcapitalised banks, has also come under pressure to show it canbuild capital to meet tougher global rules and UK regulatorydemands, which analysts said had seen it take a cautiousapproach to dividends to preserve cash.

HSBC's 2013 pretax profit is expected to come in at $24.3billion, according to the average of 27 analysts polled byThomson Reuters, which would be up 18 percent from 2012 and meana $5.7 billion profit in the fourth quarter.

Its investment bank's income is expected to dip in thefourth quarter due to weakness in fixed-income revenues, afterits rivals reported a 12 percent drop in fixed-income revenuesduring the period on average. HSBC may have gained some marketshare due to its strength in foreign exchange, analysts said.

Its operating costs are expected to fall to $37.9 billion in2013 from $42.9 billion, largely thanks to the cost cuts, lowerlosses from bad loans, lower litigation and mis-selling chargesand reduced restructuring costs compared with 2012.

Gulliver had cut annualised costs by $4.5 billion by the endof September, although much of that has been absorbed by highercompliance costs.

HSBC, like many of its rivals, continues to face more coststo tidy up past mis-selling. It is also one of several banksthat has said it is cooperating with authorities investigatingforeign exchange trading and has set aside more money for otherpotential settlements. (Editing by Pravin Char)