HSBC Holdings, Europe’s biggest bank, reported full-year
earnings that missed analyst estimates as investment banking income shrank and
costs rose to an “unacceptable” level.
Net income rose to $13.2bn in 2010 from $5.83bn the previous
year, missing the $13.72bn median estimate of 15 analysts surveyed by
Bloomberg.
Bad loan provisions shrank to $14bn from $26.5bn, the
London-based bank said in a statement Monday.
Pretax profit from the investment banking unit declined to
$9.5bn from $10.5bn in 2009, HSBC said. The lender’s cost-efficiency ratio
climbed to 55.2 percent as revenue declined and employee costs increased.
That ratio is “above our target range and unacceptable to me,”
Chairman Douglas Flint said in today’s statement. “We need to re-engineer the
business to remove inefficiencies.”
HSBC is benefitting from a decision to halt subprime lending
in the US after it racked up more than $58bn in provisions from bad debts. With
income slowing there, Stuart Gulliver, 51 who succeeded Michael Geoghegan as
chief executive officer in January, is seeking to increase revenue in Asia and
emerging markets to compensate.
HSBC shares are little-changed in the past year, the
worst-performer in the five-member FTSE 350 Banks Index. The stock trades at
about 1.5 times its book value, compared with 1.9 times for Standard Chartered
Plc, the other UK bank that gains most of its profit in Asia.
In a statement, Gulliver said turmoil in the Middle East and
North Africa hasn’t materially affected the bank’s financial performance to
date.
“HSBC has been present
in the Middle East for more than 50 years and we remain absolutely committed to
its future,” Gulliver said in a statement today. “We also believe that the
region’s economies have a number of structural strengths which leave us
positive on the longer-term outlook.”
HSBC North America returned to profit last year, after three
years of losses, asset sales and the culling of more than 6,000 jobs. Pretax
profit was $454m, compared with a loss of $7.7bn in 2009. The unit includes the
former subprime lender Household International, which is closed to new
business.
Gulliver, the former head of the investment bank, was named
CEO in September in the culmination of a boardroom struggle as Chairman Stephen
Green stepped down to join the government. Green was replaced by former Finance
Director Douglas Flint.
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