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HSBC Q1 Pre-Tax Earnings Up on Higher Revenues, Costs Rise
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HSBC Holdings (HSBC - Free Report) recorded first-quarter 2019 pre-tax profit of $6.2 billion, up 30.7% year over year. This increase was due to rise in revenues.
During pre-market trading, the company’s shares gained 2.6% on the NYSE. Notably, the actual picture will emerge after the full-day trading session.
Results benefited from an improvement in revenues. However, rise in operating expenses because of the company’s continued investments in growth programs acted as a headwind.
Revenues Improve, Expenses Rise
Adjusted total revenues of $14.4 billion grew 9.2% year over year. The upswing mainly reflects higher net interest income, partially offset by decline in net fee income.
Adjusted total operating expenses rose 3.2% from the prior-year quarter to $8.1 billion. This underlines rise in investments for business growth programs.
Quarterly Performance by Business Lines
Retail Banking and Wealth Management: The segment reported $2.2 billion in pre-tax profit, up 21% year over year. This upside was driven by higher revenues and lower operating expenses.
Commercial Banking: The segment reported pre-tax profit of $2 billion, down 4.6% from the year-ago quarter. This decline was due to rise in operating expenses, partly offset by higher revenues.
Global Banking and Markets: Pre-tax profit of $1.5 billion for the segment decreased 13.2% from the prior-year quarter. This decrease was primarily due to higher operating expenses and lower revenues.
Global Private Banking: Pre-tax profit for the segment was $96 million compared with pre-tax profit of $70 million in the year-ago quarter. The improvement was largely due to declining expenses.
Corporate Centre: The segment reported pre-tax profit of $396 million against pre-tax loss of $990 million in the prior-year quarter. Increase in revenues and lower expenses were largely responsible for the improved performance.
Capital Ratios Deteriorate
Common equity Tier 1 ratio (transitional) as of Mar 31, 2019, was 14.3%, down from 14.5% as of Mar 31, 2018. Further, leverage ratio was 5.4%, down from 5.6% as of Mar 31, 2018.
Our Viewpoint
By disposing of unprofitable/non-core operations, HSBC has been successful in enhancing efficiency. However, weak European economy, low loan demand, Brexit-related uncertainty and litigation expenses will continue to curb the bank’s near-term growth.
HSBC Holdings plc Price, Consensus and EPS Surprise
Performance & Expected Earnings Dates of Other Foreign Banks
Barclays (BCS - Free Report) reported first-quarter 2019 net income attributable to ordinary equity holders of £1.04 billion ($1.36 billion). This reflects improvement from net loss of £764 million ($1.01 billion) incurred in the prior-year quarter.
The Toronto-Dominion Bank (TD - Free Report) is expected to report results on May 23 and Bank of Montreal (BMO - Free Report) is slated to report numbers on May 29.
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HSBC Q1 Pre-Tax Earnings Up on Higher Revenues, Costs Rise
HSBC Holdings (HSBC - Free Report) recorded first-quarter 2019 pre-tax profit of $6.2 billion, up 30.7% year over year. This increase was due to rise in revenues.
During pre-market trading, the company’s shares gained 2.6% on the NYSE. Notably, the actual picture will emerge after the full-day trading session.
Results benefited from an improvement in revenues. However, rise in operating expenses because of the company’s continued investments in growth programs acted as a headwind.
Revenues Improve, Expenses Rise
Adjusted total revenues of $14.4 billion grew 9.2% year over year. The upswing mainly reflects higher net interest income, partially offset by decline in net fee income.
Adjusted total operating expenses rose 3.2% from the prior-year quarter to $8.1 billion. This underlines rise in investments for business growth programs.
Quarterly Performance by Business Lines
Retail Banking and Wealth Management: The segment reported $2.2 billion in pre-tax profit, up 21% year over year. This upside was driven by higher revenues and lower operating expenses.
Commercial Banking: The segment reported pre-tax profit of $2 billion, down 4.6% from the year-ago quarter. This decline was due to rise in operating expenses, partly offset by higher revenues.
Global Banking and Markets: Pre-tax profit of $1.5 billion for the segment decreased 13.2% from the prior-year quarter. This decrease was primarily due to higher operating expenses and lower revenues.
Global Private Banking: Pre-tax profit for the segment was $96 million compared with pre-tax profit of $70 million in the year-ago quarter. The improvement was largely due to declining expenses.
Corporate Centre: The segment reported pre-tax profit of $396 million against pre-tax loss of $990 million in the prior-year quarter. Increase in revenues and lower expenses were largely responsible for the improved performance.
Capital Ratios Deteriorate
Common equity Tier 1 ratio (transitional) as of Mar 31, 2019, was 14.3%, down from 14.5% as of Mar 31, 2018. Further, leverage ratio was 5.4%, down from 5.6% as of Mar 31, 2018.
Our Viewpoint
By disposing of unprofitable/non-core operations, HSBC has been successful in enhancing efficiency. However, weak European economy, low loan demand, Brexit-related uncertainty and litigation expenses will continue to curb the bank’s near-term growth.
HSBC Holdings plc Price, Consensus and EPS Surprise
HSBC Holdings plc Price, Consensus and EPS Surprise | HSBC Holdings plc Quote
Currently, HSBC carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance & Expected Earnings Dates of Other Foreign Banks
Barclays (BCS - Free Report) reported first-quarter 2019 net income attributable to ordinary equity holders of £1.04 billion ($1.36 billion). This reflects improvement from net loss of £764 million ($1.01 billion) incurred in the prior-year quarter.
The Toronto-Dominion Bank (TD - Free Report) is expected to report results on May 23 and Bank of Montreal (BMO - Free Report) is slated to report numbers on May 29.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>