Europe’s largest bank, HSBC, said on Tuesday that 2018 net profit came in below expectations following a challenging fourth-quarter when markets globally experienced a sharp sell-off and reduced activity.
The bank’s reported pre-tax profit for the whole of 2018 was $19.89 billion, 15.9 percent higher than the previous year. Reported revenue last year was $53.78 billion, 4.5 percent higher than 2017.
The London-headquartered bank was expected to record a 23.8 percent jump in reported pre-tax profit to $21.26 billion for 2018, according to forecasts compiled by Refinitiv. Revenue for the year was projected to be 6.28 percent higher at $54.674 billion, data by Refinitiv showed.
Global markets were hit by a sharp sell-off in stocks and other asset classes in the fourth-quarter last year, leading to trading revenue losses in many banking groups. HSBC won’t be spared, said Kenny Wen, wealth management strategist at Hong Kong-based financial services firm Everbright Sun Hung Kai.
There were some issues that need attention, Wen pointed out.
“First of all, from the revenue side. I’m a little bit concerned about capital markets because, as we all know, in last year’s fourth-quarter, sentiment and market conditions were not so good. So, capital markets or global markets as it’s called in HSBC, the revenue may be under pressure,” Wen told CNBC’s “Squawk Box” on Tuesday before the earnings release.
The bank’s loans business may also be lackluster, especially in Hong Kong where the benchmark interest rate has retreated and growth in overall lending activity has slowed down, the strategist added. Hong Kong is a key market for HSBC, accounting for around one-third of overall revenue in the first nine months of 2018.
In addition to the latest earnings, Wen said he will be looking out for HSBC’s guidance on business outlook, and announcements on share-buyback and dividends. He said he’s expecting HSBC to announce a plan to buy back shares worth up to $1.5 billion this year.
“If the final number is higher than this, say $2 billion or $2.5 billion, obviously that will be very positive for the share price,” Wen said.
Ahead of its earnings release, HSBC’s Hong Kong-listed shares were flat in early trade on Tuesday. The shares have risen by 4.6 percent so far this year.