HSBC revenue trails estimates as flint pushes for Asia growth

An aeroplane approaches the city airport passing the offices of HSBC Holdings Plc in the Canary Wharf business, financial and shopping district in London, U.K., on Thursday, June 5, 2018. (Bloomberg pic)

HONG KONG: HSBC Holdings Plc Chief Executive Officer John Flint’s massive bet on Asia has yet to translate into any significant revenue growth.

The London-based bank on Monday said second-quarter adjusted revenue advanced 2% from a year earlier to $13.7 billion, below the average estimate among three analysts surveyed by Bloomberg. Costs, meanwhile, increased 7% as Flint stepped up investments in areas including technology.

Flint, promoted to chief executive officer in February, plans to grow the global behemoth by expanding in key Asian markets including China and establishing the lender as a top-tier wealth manager. Flint’s plan earlier this year to invest $17 billion to build its presence in the region and improving technology was met with a lukewarm reception, amid concern about how long cost growth would outpace revenue and hold back the dividend.

Like UK rival Standard Chartered Plc, HSBC has struggled to consistently deliver revenue gains that outpace cost increases — what analysts refer to as positive jaws. Still, Flint stuck to his projection that the bank will be able to bolster revenue faster than costs for the full year.

“We are investing to win new customers, increase our market share, and lay the foundations for consistent growth in profits and returns,” Flint said in a statement announcing the results.

Finance Director Iain Mackay said in an interview with Bloomberg Television that costs are “absolutely in line” with where the company expected to be, adding that HSBC is being deliberate about investing in areas where it expects growth.

“We are sitting in a pretty sensible place,” he said.

Pretax profit on an adjusted basis was $6.11 billion, slightly ahead of the $6.05 billion average estimate of analysts surveyed by HSBC. The company announced a second-quarter interim dividend of 10 cents a share. HSBC also announced a $765 million penalty in the US over a probe into residential mortgage-backed securities.

Below are some highlights from today’s second-quarter results:

Adjusted operating costs were $8.1 billion, 7% higher than year-earlier.

Lending rose 3% from first quarter to $26 billion.

Common equity Tier 1 capital ratio rose to 14.2%.

Reported pre-tax profit rose 13% year-on-year to $6 billion.