Getting a handle on costs looks to be one of the main challenges for new HSBC (HSBA) chief executive John Flint, as it was for his predecessor through 2017. Presenting his first set of results in the top job, Mr Flint reported a worse-than-expected 13 per cent increase in operating expenses during the first quarter, while additional investment in digital banking absorbed further capital. These increased commitments offset 3 per cent growth in underlying revenue, pushing down pre-tax profits by the same amount. The group also incurred $897m (£663m) in legal and regulatory provisions.
There was mixed news for income seekers. Although management announced a $2bn share buyback, it reckons it will be the only one it will declare this year, preferring to invest capital for growth. Still, the common equity tier one ratio – regulatory capital as a proportion of total risk-weighted assets (RWAs) – remained ahead of management’s 13 per cent target at 14.5 per cent.
With around 65 per cent of the loan book at variable interest rates, rising global rates buoyed net income, which beat consensus expectations on an underlying basis. The net interest margin rose to 1.67 per cent, from 1.63 per cent year on year. At the retail banking and wealth management business, wider spreads on the loan book and balance growth in current accounts, savings and deposits, drove a 9 per cent increase in revenue. However, global banking and markets income was flat on the prior year, with reduced fixed-income business offsetting a rise in global lending balances.
