The announcement of a new $ 2 billion share buyback is not enough for investors: HSBC Holding dropped 2.7% on the Hong Kong stock exchange this morning after the announcement of first quarter figures largely in line with the expectations, were it not for the cost increase of 8% on an annual basis (adjusted).
Pre-tax profit of $4.76 billion for the three months ended March 31, compared with $4.96 billion in the same period previous year, fell short of City estimates for a quarterly profit of $5.76 billion.
The banking behemoth generated revenue of $13.7bn in the first three months of the year, up 6% compared to a year ago, or 3% at the underlying level if excluding currency translation and movements in significant items.
The bank made over 75 percent of its profits in Asia in 2017.
The buyback is expected to be HSBC's only one this year "given the growth opportunities we now see", the company said in an investor presentation Friday. Mr Flint said the 8 per cent rise in underlying quarterly costs reflected investments in its Chinese and United Kingdom retail banking operations, its Chinese securities joint venture and digital improvements across the group. "Last year the rate of costs growth exceeded revenue growth until the full year, and that is very much the shape of what we expect this year to look like".
The rising costs and subdued return on equity reported Friday underline the challenges.
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London-based HSBC reported a decline in its first-quarter pretax profit due to increased spending on investments.
Return on equity for the bank fell compared with the same quarter past year, from 8 per cent to 7.5 per cent.
He said: "Our global businesses performed well in the first quarter, maintaining momentum from the end of 2017".
Its revenue for the quarter, meanwhile, climbed to $13.71 billion from $12.993 billion a year ago.
The bank's chief executive John Flint - who only took over in February - said: "A stronger revenue environment enabled us to invest in growing the business".