London/Hong Kong: HSBC Holdings Plc’s fourth-quarter profit missed estimates amid lower revenue, as the lender extended a stock buyback that has driven its London shares to a three-year high.
Adjusted pretax profit, which excludes one-time items, jumped 39% to $2.62 billion, Europe’s largest bank said in a statement on Tuesday. That missed the $3.78 billion average estimate of six analysts compiled by Bloomberg News. On an unadjusted basis, HSBC reported a $3.4 billion pretax loss for the fourth quarter. The bank’s shares fell in Hong Kong by the most since November.
Chief executive officer Stuart Gulliver said the lender will spend $1 billion buying back its stock, adding to $2.5 billion of repurchases it made last year. Gulliver is battling five years of declining revenue as he pares back HSBC’s sprawling global footprint and cuts $5 billion in costs. HSBC also has to assess its operations after the UK voted to leave the European Union and navigate the potential global disruption from US President Donald Trump’s protectionist stance.
“We anticipate new challenges in 2017 from geopolitical developments, heightened trade barriers and regulatory uncertainty,” Gulliver said in the statement.
Adjusted revenue in the fourth quarter fell 3% to $11 billion, less than the $12.4 billion analysts expected. Operating costs rose 3% to $8.4 billion, compared with the $8.3 billion average estimate of the six analysts surveyed.
The bank’s Hong Kong stock lost 3.4% to HK$66.65 as of 1:21pm local time, the biggest intraday drop since 9 November.
In London, HSBC shares surged 57% since the Brexit vote on 23 June, the most of any major European bank, rising to 712.30 pence, the highest since August 2013. Even so, the lender trades at less than its book value.
Since Gulliver started restructuring in 2011, he’s slashed more than 40,000 jobs and has pledged another 25,000 cuts, exited at least 80 businesses and reduced its global footprint to 71 countries and territories from 88. Nevertheless, alongside most European lenders, HSBC has been struggling to boost profitability. Investors need to lower their expectations as a 10% return on equity is probably the best a large universal lender can do, the CEO said in January.
Gulliver, 57, along with chairman Douglas Flint, 61, are the longest-serving duo heading a major European bank. HSBC said last March that it will nominate a replacement for Flint sometime in 2017 and Flint said in the statement that the process to find his successor remains “on track.”
The bank reported a common equity Tier 1 ratio, the key measure of financial resilience, of 13.6%, compared with 13.9% at the end of September. While the latest figure was slightly lower than estimated, the capital position helped HSBC announce the additional buyback, Goldman Sachs Group Inc. analysts wrote in a report.
The stock purchases are expected to be completed in the first half this year, HSBC said.