2013 results
While profits are up in most regions, the cost programme is ahead of target, impairments are falling, the balance sheet strengthened and the management tone is relatively positive, we would expect the revenue miss against consensus to see 2014 and 2015 estimates modestly cut.
Profit and loss breakdown
HSBC Holdings Plc's, (HSBC) underlying PBT was US$21.6bn (up 41% on 2012) and reported profit up 9% to $22.6bn. EPS was $0.84 (2012: 74c), and dividends up to $0.49 per share (consensus 51c). Underlying revenue grew to $63.3bn (2012: $61.6bn) with reported revenue of $64.6bn (consensus $66.4bn; 2012 $68.3bn). Costs were down 6% to $38bn. The cost income ratio improved to 59.6% (consensus 57.1%, 2012: 62.8%). Loan impairments fell to $5.8bn (consensus $6.2bn, 2012: $8.3bn).
Business sector breakdown
The largest profit centre was Global Banking and Markets (2013 reported $9.4bn vs consensus $9.4bn; $8.5bn in 2012). Commercial Banking profits were $8.4bn (consensus $8.2bn; 2012: $8.5bn) with falling costs and higher revenue partially offset by higher impairments. Retail Banking and Wealth Management produced profits of $6.6bn (consensus $7.1bn; 2012: $9.6bn). Global Private Banking profits fell to $0.2bn (consensus $0.4bn; 2012: $1.0bn) with lower revenue and higher costs as it restructures. Other losses included the UK bank levy (£0.9bn) and fair value of own debt (£0.6bn). Prior year comparisons are affected by 53 disposals.
Geographic breakdown
The Rest of Asia Pacific reported profits of $7.7bn (consensus $8.2bn; 2012: $10.4bn). Hong Kong saw strong profit growth (2013 $8.1bn vs consensus $8.2bn; 2012: $7.6bn). Europe swung back into profit (2013 $1.8bn v consensus $3.1bn; 2012 loss: $3.4bn). Middle East and North Africa profits were $1.7bn (consensus $1.7bn; 2012: $1.4bn). North America profits were $1.2bn (consensus $1.1bn; 2012: $2.3bn). Latin America contributed $1.9bn (consensus $2.5bn; 2012: $2.4bn).
Balance sheet strength
HSBC core Tier 1 rose to 13.6% (30 Sept 2013 13.3%, 31 Dec 2012 12.3%) while the CRD IV common equity Tier ratio (post assumed future management mitigating action) improved to 10.9% (30 Sept 2013 10.6%, 31 Dec 2012 10.1%). The loan to deposit ratio was 73%. Regulatory uncertainty remains, but these are strong ratios.
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