HSBC HOLDINGS, Europe’s largest bank by market value, said it’s on a “clear trajectory” to meeting its profitability target next year as it posted pretax profit that missed analyst estimates.
Pretax profit rose 15 per cent to $21.9 billion last year, narrowly missing analysts’ estimates. Chief executive Stuart Gulliver told reporters the lender was still “confident” of hitting its 12 per cent return on equity target by 2013.
Mr Gulliver has sold or closed 19 units since 2010 and is cutting 30,000 jobs to save as much as $3.5 billion by 2013 and revive profitability.
The lender had made $900 million of savings and expects to meet the “upper end” of its cost-reduction goal by 2013, he said today.
HSBC is sticking with its profit target even after Barclays said it won’t make its target in 2013 and Royal Bank of Scotland reduced its goal.
“We regard these results as reassuring, rather than spectacular,” Mark Phin, an analyst at Keefe, Bruyette and Woods Ltd in London said.
The shares fell 3.7 per cent to 553.5 pence in London trading. The stock has dropped 22 per cent in the past 12 months, less than the 43-member Bloomberg Europe Banks and Financial Services Indexs 29 per cent decline.
The lender will pay a 41 cent-a-share dividend for 2011, the most since 2007.
Return on equity rose to 10.9 per cent from 9.5 per cent last year, still short of the lender’s target range of 12 per cent to 15 per cent. Mr Gulliver said in November the measure would be at the “softer end” of its range by 2013.
“The strength of our position gives us confidence that by the end of 2012 we will have developed a clear trajectory towards meeting our target,” Mr Gulliver (52) said in a statement.
Costs as a proportion of revenue climbed to 57.5 per cent from 55.2 per cent, more than the 48-52 per cent target range set by HSBC. The lender blamed the increase on rising wages and costs for compensating both clients who were mis-sold insurance to cover loan repayments and elderly customers who were advised to buy products to fund nursing-home costs that would only pay out after some of them were expected to die. – Bloomberg
