HSBC Holdings plc (ADR) (NYSE:HBC) (LON:HSBA) posted first quarter earnings today that exceeded analysts’ expectations, owing to reduced costs and a decline in bad debts. The earnings for the British bank jumped almost 50 percent to $8.43 billion, versus $4.32 billion in the period a year earlier. Analysts expected an average pretax profit of $8.1 billion.
“We’re moving into calmer waters but there are still challenges ahead,” HSBC’s chief executive, Stuart T. Gulliver, told during the conference.
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HSBC Holdings plc (ADR) (NYSE:HBC) (LON:HSBA) reported a PBT (Profit Before tax) of $6.9 billion, which though beat the general consensus, was below the $7.4 billion expected by Bank of America Merril Lynch (BAML). As per the report, bad debts were low with 11bp in Europe, Honk Kong, Asia and Middle East against the long run average of 59bp. Commenting on the overall results, a report from BAML said “we think the 1Q13 performance is disappointing, though reflects the challenging environment.”
Excluding the $1.2bn of disposal gains, revenues from Asia were $7.1billon marginally exceeding the estimate of $7.0 billion, says the report. Revenues performance was on the weaker side. Excluding some of the items, revenues were flat, says the management.
For the quarter, operating expenses were down 11 percent to $9.3 billion, from $10.4 billion in the year earlier quarter. During the quarter, HSBC reserved $1.2 billion for bad loans and other credit risks compared to 2.4 billion in the year earlier quarter.
HSBS has been undergoing a massive restructuring with regard to cost reduction. The bank has resorted to job cuts, asset sales and selling of stakes in unprofitable business segments. In February, the British bank sold its Panama unit to Bancolombia for $2.1 billion, and last month, the bank announced to axe about 1,150 jobs in Britain.
For the first quarter, HSBC Holdings plc (ADR) (NYSE:HBC) (LON:HSBA) saved $400 million in costs. Including this, the full year savings stand at $4.0 billion. As per the report, overall cost performance was good when compared to the estimates. HSBC reported bad debt of $1.2 billion much better than the estimates of $1.9 billion. As per the BAML estimates, bad debts from US were $241 million better and Latin America was $65 million worse. Collectively Europe, HK and Rest of Asia and Middle East were US$564 million better, says the BAML report.
Earlier, earnings of the bank have been tarred by some irresponsible decisions. Last year, the bank agreed to settle the charges levied by American authorities over money laundering. HSBC Holdings plc (ADR) (NYSE:HBC) (LON:HSBA) has also made a provision for more than $2 billion to compensate the customers over improper selling of the some of the financial products.
HSBC Holdings plc (ADR) (NYSE:HBC) (LON:HSBA) will announce next week of its plans and progress made in the cost-reduction program. Tuesday morning, in London, shares of HSBC were up 2.8 percent.