HSBC shares dipped 2% in Hong Kong after it said cost growth outstripped revenue at the end of 2018. The bank said customers held off on business when markets turned volatile last year, hitting revenue in its global markets business and retail banking and wealth management units. It reported a full-year net profit of $12.6 billion, less than the $13.71 billion analysts expected.
HSBC Chief Executive John Flint in an interview said the bank had been on track to meet fourth-quarter cost control targets until revenue collapsed in parts of the bank in November. He said it was “very much a fourth-quarter problem” and that the bank started 2019 in a “fundamentally different” position.
Mr. Flint is marking his first year as CEO and didn’t signal any shifts in a strategy update on HSBC’s focus on Asia for growth. He said the trade dispute between the U.S. and China hadn’t had any effect on the credit quality of customers but had resulted in weaker loan demand. HSBC Chairman Mark Tucker in a statement Tuesday said differences between the U.S. and China are likely to continue to “inform sentiment” this year.
The bank said it adjusted provisions for potential loan losses relating to trade and tariff-related tension, and took a $165 million charge in the fourth-quarter to reflect the increased level of economic uncertainty in the U.K. from its departure from the European Union.
Mr. Flint said the bank is prepared for Brexit but that uncertainty around the terms of the exit have caused some businesses to delay investment and that “customers are desperate for certainty.”
Full-year revenue at the bank was $53.78 billion, up from $51.4 billion in 2017. Fourth-quarter revenue was up across HSBC but some units posted double-digit declines. Mr. Flint said the turnaround of the bank’s U.S. business is still a work in progress and that it still has “a long way to go” to hit a 6% return on equity target by 2020.
Also on Tuesday, HSBC said the European Commission has asked it for information around potential coordination in foreign exchange options trading. It said the matter is at an early stage.