HSBC reaps benefit of cost-cutting efforts

Reports a pretax profit of $8.4 billion, up from $4.3 billion a year ago

HSBC reported a near doubling in first quarter earnings on Tuesday, demonstrating the benefits of a three-year restructuring, cost cuts and a big drop in bad debt charges.

Europe's largest bank has moved faster and more aggressively than many of its peers to reduce costs in the wake of the financial crisis, shedding 38,000 jobs and closing or selling more than 50 businesses.

The bank reported a pretax profit of $8.4 billion, up from $4.3 billion a year ago and above the average forecast of $8.1 billion from analysts polled by the company.

A $1.1 billion gain from disposals aided earnings as did a halving of bad debt provisions to $1.2 billion, helped by the winding down of some US loan books.

Costs in the first quarter were down 10% from a year ago. Costs are now just over 53% of income, close to the bank's target to get them below 52% by the year-end.

Across Europe, smaller rivals are also cutting back. French banks Societe Generale and Credit Agricole on Tuesday committed to keep cutting costs to help offset a weak domestic economy.

HSBC has compensated for weakness in Europe with strong growth in Asia and the bank said it expected the mainland Chinese economy to accelerate after a slower than expected start to the year. HSBC expects the euro zone economy to contract this year.

HSBC shares rose more than 3%, outperforming the European benchmark, which was 1.57% higher.