HSBC Holdings Plc kick-started the United Kingdom bank earnings season with the final set of results for Chief Executive Officer Stuart Gulliver as John Flint assumes the role.
The bank's Hong Kong-listed shares, a heavyweight on the Hang Seng Index, fell 3.11 percent on Tuesday, erasing the gains seen before the release of the latest earnings report. The 2017 result was less than the $19.7bn average estimate in a Reuters poll of analysts.
Rising interest rates helped the bank to increase revenues in its retail division by 9 percent in 2017, particularly from growing deposits and charging higher spreads in its second home market of Hong Kong. The annual dividend was unchanged at 51 cents a share. The company has set aside a further $164 million of regulatory provisions, but this is down from $344 million in 2016.
That has been spearheaded by chief executive Stuart Gulliver, who on Wednesday will hand over the reins to John Flint after seven years at the helm. Although the bank has shown its "best growth in customer deposits and loans since early 2014", shares are down because it is "as if investors are politely telling the new management team of chair Mark Tucker and chief executive John Flint not to get too aggressive when it comes to future expansion plans or even acquisitions". He has dealt with the after-effects of rapid expansion that caused the bank to lose its grip on activities in Mexico, where it was used to launder money by drug gangs, and Switzerland, where it admitted aiding aggressive tax avoidance.
Gulliver says: "These good results demonstrate the strength and potential of HSBC. All our global businesses grew adjusted profits and we concluded the transformation programme that we started in 2015", he said.
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HSBC said it was planning additional tier 1 capital issuance of between $5 billion and $7 billion during the first half of 2018, and that it would undertake share buybacks "as and when appropriate".
ROTCE improved to 6.8% vs 2.6% last year, and CET ratio improved to 14.5% vs 13.6% last year. After shrinking and imposing central control over the lender's far-flung global network, while enduring several misconduct issues, investors are now looking for a return to growth.
"The fundamentals of HSBC will remain the same as they always have - strong funding and liquidity, strong capital and a conservative approach to credit", he said.
That compares with a loss of $1.9bn recorded in Europe. HSBC already paid about 300 million euros ($370 million) to settle a criminal investigation by the French government into allegations it helped clients evade taxes, the second-biggest corporate charge levied by an authority in the nation in November past year. HSBC said Gulliver warranted his pay because he hit most of his targets, including scaling back HSBC's business and keeping a grip on risk and regulatory compliance.