HSBC first quarter profit falls 14% on weak trading, but beats expectations

Profit also aided by favourable credit spreads movements in its debt and drop in operating expenses from a year ago

HSBC reported a smaller-than-expected 14 percent drop in quarterly profit, as a surge in revenue at its commercial banking unit partly offset the weak trading business caused by the grim global market environment early in the year.

The first-quarter profit of Europe's biggest lender was also helped by favourable credit spreads movements in its debt and a drop in its operating expenses from a year-ago period, the bank said in a statement.

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HSBC reported on Tuesday a pretax profit of $6.1 billion for the first three months of this year, down from $7.1 billion a year ago, but above the average forecast of $4.3 billion from analysts polled by the company.

Underlying revenues fell 4 percent year on year to $13.9 billion, as the markets division's income dropped 12 percent. Commercial banking revenue, however, rose 2 percent in the March quarter, helped by continued loan growth in UK.

HSBC's Hong Kong shares pared losses in afternoon trading after the results, and were trading down 0.3 percent by 0524 GMT after having fallen 1.4 percent earlier.

"Market uncertainty led to extreme levels of volatility in January and February, which affected our ability to generate revenue in our markets and wealth management businesses," HSBC Chief Executive Stuart Gulliver said in a statement.

"However, our diversified, universal-banking business model helped to cushion the impact through growth in other parts of the bank," he said, adding the lender was confident of hitting its cost target by the end of 2017.

HSBC made market share gains in debt capital markets, China M&A and syndicated lending in the first quarter, and had strong business wins on the back of its investments in Asia, Gulliver said.

Gulliver has been facing challenges to restore HSBC to strong growth, after it reported flat annual pretax profit in 2015 amid ongoing disposal costs as it shrinks its global business.

With HSBC's common equity tier 1 ratio reaching 11.9 percent in the first quarter, investors are moving from concerns over capital to focus on whether the bank can improve revenues by delivering on a strategy of expanding into China.