HSBC posted a big drop in profits -- but its results were pretty good

HSBC posted a massive drop in profits for the first three months of the year but its results weren’t all that bad.

HSBC said in a statement that adjusted pre-tax profits sank by 18% year-on-year to $5.4 billion in the first quarter this year. However, this was still ahead of analyst expectations of $4.2 billion.

Adjusted revenue for the first three months of the year also dropped by 4% to $13.9 billion.

The dividend — the reward given to shareholders — was not axed, as many analysts had feared, and was held at 10 cents per share.

This was another sign that HSBC’s results were not as bad as it could’ve been. Dividend stayed at the same level from a year earlier.

The statement from Stuart Gulliver, CEO at HSBC also provided some highlights as to how it may have had to battle with some deteriorating market conditions but it was growing market share elsewhere (emphasis ours):

Our first quarter performance was resilient in tough market conditions that affected the entire banking sector. Profits were down against a very strong first quarter of 2015, but we increased market share in many of the product areas that are critical to our strategy.

Market uncertainty led to extreme levels of volatility in January and February, which affected our ability to generate revenue in our Markets and Wealth Management businesses.

However, our diversified, universal-banking business model helped to cushion the impact through growth in other parts of the bank
.

Commercial Banking continued its momentum in spite of the slow-down in global trade, and we increased market share across our strategic trade corridors.

We also grew revenue elsewhere in Retail Banking and Wealth Management, particularly from current and savings accounts in Hong Kong and the UK, and personal lending in Asia and Mexico.

A combination of tight cost management and the increasing impact of our cost-saving programmes reduced operating expenses relative to the fourth quarter of 2015.

Basically, it grew revenue and market share in other areas, so even though market conditions are volatile right now, it is still doing a lot of business in regions that are set to grow further. So, if any one off charges from litigation or markets going a bit nuts for a while hurts its profits, its underlying business is a lot healthier in the long run.

HSBC is also undergoing a major cost cutting programme at the moment and the analyst call at 8.15 B.S.T may shed some light on how it plans to get back into profitability again.

It is already cutting around 50,000 jobs in the bid to save $5 billion a year by 2017. The bank, like most others, is seeking to cut costs and reduce the size of its capital-intensive investment banking operations.

It is also pushing to claim greater market share in regions where it is seeing growth, such as Asia.

However, while pay is usually an area where a bank can cut costs from, it u-turned on a globa pay freeze last week after a protest from employees, saying it would find cost savings elsewhere.

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