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HSBC sees 62% fall in profits and share price slump

  • 21/02/2017
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HSBC sees 62% fall in profits and share price slump
HSBC reported a 62% year-on-year fall in profit before tax from $18.9bn to $7.1bn in its full year results for 2016, due to a series of one-off changes including the sale of its Brazilian operation.

The decline in profits drove the bank’s share price down by 6.1% to 668p.

Jordan Hiscott, chief trader at Ayondo Markets, said it was the biggest fall the bank had experienced since the UK voted to leave the European Union. However, he added: “It should be noted that before today, the third largest constituent in market capitalisation terms in the FTSE 100 had performed astoundingly well, up over 60% on a year-to-date basis, trading to a recent high of 715p.”

Iain Mackay, HSBC’s group finance director, said 2016 had presented a difficult operating environment for the bank with regulatory and geo-political uncertainties.

In the UK, growth in mortgage balances was assisted by the banks expansion into the mortgage intermediary market, with 12 brokers added in 2016, which accounted for 7% of its new mortgage originations during 2016.

The bank has upgraded its forecasts for global economic growth but highlighted trade decisions made by the Trump administration and deals struck between the UK and EU in Brexit negotiations as risks to these forecasts.

In his chairman’s statement, Douglas Flint took the opportunity to express how disappointing it was that the regulators had still not completed the Basel III framework, missing its January 2017 deadline.

He said: “It is now almost 10 years since the commencement of the global financial crisis and it is time to draw a line under further regulatory change, particularly since there is no doubt that our industry is more strongly capitalised, better governed and more risk aware than it was a decade ago.”

He said the it was crucial to finalise the structure and calibration of the capital framework to give banks certainty over prospective capital allocations in support of lending and market activities.

Flint said it was of equal importance to avoid fragmentation across global frameworks as the new US administration reconsidered its participation in international regulatory forums. He added: “The best outcome would be early global agreement on unresolved issues, followed by an extended period of regulatory stability to allow familiarity and experience to be gained from what has been put in place.”

HSBC said that it has broadly all the licences and infrastructure needed to continue its support for its customers once the UK leaves the EU.

Flint said: “This largely derives from our position in France where we are the sixth largest bank with a full range of capabilities. Current contingency planning suggests we may need to relocate some 1,000 roles from London to Paris progressively over the next two years, depending on how negotiations develop.”

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