19th Feb 2019 06:23
LONDON (Alliance News) - FTSE 100-listed banking giant HSBC Holdings PLC held its full year dividend Tuesday after profit and revenue expanded amid strong growth in Asia, despite a tough fourth quarter performance crimping results.
In 2018, pretax profit widened 16% to USD19.89 billion from USD17.17 billion the year prior. This was after revenue rose 4.5% to USD53.78 billion from USD51.45 billion the year before.
The reported pretax profit fell short of market expectations. Analyst consensus saw HSBC achieving pretax profit of USD20.93 billion. HSBC shares were down 1.3% in Hong Kong trading.
"These are good results that demonstrate progress against the plan that I outlined in June 2018," HSBC Chief Executive Officer John Flint said.
In June 2018, newly-appointed Flint described a strategy in which the banking group would return to "growth mode" following its period of restructuring.
By 2020, HSBC is targeting a return on tangible equity of more than 11% under this new strategy. It also plans to invest between USD15 billion and USD17 billion dependant on "achieving positive adjusted jaws each financial year".
"Profits and revenue were both up despite a challenging fourth quarter, and our return on tangible equity is significantly higher than in 2017," Flint added. "This is an encouraging first step towards meeting our return on tangible equity target of more than 11% by 2020."
Return on tangible equity stood at 8.6% in 2018, wider than the 6.8% reported in 2017.
Adjusted jaws in 2018 fell to negative 1.2% due to lower adjusted revenue in the fourth quarter of 2018. This was due to "weakness in markets" but the firm remained commitment to the "discipline of positive adjusted jaws."
The jaws ratio - a key financial performance indicator - is the difference between the percentage growth in income and the percentage growth in expenses.
The CET1 solvency ratio for HSBC in 2018 stood at 14.0%.
For the fourth quarter, HSBC held its dividend unchanged at 21 US cents per share. For the full year, the dividend was also unchanged at 51 cents with the firm "confident" of maintaining the dividend at this level in the future.
"HSBC is in a strong position," Chair Mark Tucker said. "Our performance in 2018 demonstrated the underlying health of the business and the potential of the strategy that John Flint, our Group Chief Executive, announced in June."
"Despite a challenging external environment in the fourth quarter, all of our global businesses delivered increased profits and the group achieved a higher return on tangible equity in 2018," Tucker added. "Asia again contributed a substantial portion of the Group's profits, notably in Retail Banking and Wealth Management and Commercial Banking."
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