HSBC Holdings plc (ADR) (NYSE:HBC) (LON:HSBA), shares dropped in London trading after the bank posted earnings that missed the consensus estimates. Chief Executive Officer Stuart Gulliver commented that its fast-growing emerging markets are slowing, which also pushed the prices down.
First half performance
For the first half, Europe’s largest bank reported a 10 percent rise in net income to $10.28 billion, which missed the analyst’s estimate of $10.57 billion, says a report from Bloomberg. The rise in net income was primarily due to the decline in overall loan impairments to $3.1 billion.
Revenues for the first half were down 7 percent to $34.4 billion due to slow growth of Asian and European economies. Underlying costs for the bank was 8 percent lower compared to the same period a year ago, when it was ordered a $2 billion regulatory fine and customer redress charges. HSBC Holdings plc (ADR) (NYSE:HBC) (LON:HSBA) reserved $367 million to compensate the consumers who were sold loans insurance inappropriately. For the same reason, Barclays Plc (ADR) (NYSE:BCS) kept 1.35 billion pounds ($2.1 billion).
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Slowdown in fast growing markets a concern for HSBC
HSBC Holdings plc (ADR) (NYSE:HBC) (LON:HSBA) told in a statement that in the first quarter, growth in the mainland Chinese market was unexpectedly slow, and the performance of the Latin American market was also a discomfort owing to weak consumer consumption in the first half of the year. Also, the lender expects “highly damaging impact” from the planned restrictions by European Union on bonuses.
Gulliver told in the conference call “There has been a slowdown in faster-growing markets in recent quarters,” and added “Even emerging markets go through business cycles, and this has impacted our revenue and our profit growth.”
In western markets also growth has been “subdued”, according to the bank.
Cost cutting measures
Also, HSBC is limiting its expansion in the U.S. consumer banking. Gulliver, after taking charge in 2011, has closed 54 businesses to focus on markets or segments that are profitable. However, the pace of asset sales will be slow now, told Gulliver.
Gulliver told that, since 2011, he has worked to save around $4.1 billion in costs, including $800 million this year. The cost saving program from the bank included significant job cuts. In the first half, the bank lost 1,100 employees bringing the total head count to 259,400, and expects another 4,500 jobs to be lost. HSBC is targeting a head count between 240,000-250,000 compared to 302,000 two years ago.
HSBC Holdings plc (ADR) (NYSE:HBC) (LON:HSBA) operates in about 80 countries and has 55 million customers and 6,600 offices around the world. Shares of the London-based lender were down around 5 percent, the most since November 2011.