LONDON (Alliance News) - HSBC Holdings PLC Tuesday reported higher first-quarter pretax profit, driven up by its investment banking division and its Asian operations, but pressure on returns remain as the group continues its restructuring.
HSBC shares were down 2.4% at 630.90 pence on Tuesday, after having initially spiked higher on the announcement made during trading.
In a statement, the biggest London-listed bank by market capitalisation 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. 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.
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.
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.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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HSBC Holdings (HSBA)