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HSBC Holdings Plc, Europe's largest bank, slid in London trading after its earnings missed analysts' estimates. Chief Executive Officer Stuart Gulliver said the lender's fast-growing emerging markets are slowing.
First-half net income rose 10 per cent to $10.28 billion after US loan impairments fell, the London-based lender said in a statement on Monday. That was below the $10.57 billion estimate of five analysts surveyed by Bloomberg.
The shares fell as much as 4.6 per cent, the most since February 2012. HSBC, which operates in about 80 countries, said the mainland Chinese market slowed unexpectedly in the first quarter of 2013, while Latin American growth eased in the first half on weak consumer consumption. HSBC also faces a potentially "highly damaging impact" from planned European Union restrictions on bonuses, the bank said on Monday.
"There has been a slowdown in faster-growing markets in recent quarters," Gulliver told reporters on a conference call. "Even emerging markets go through business cycles, and this has impacted our revenue and our profit growth."
Growth remains "subdued" in western economies, the bank said. Gulliver has reversed the lender's expansion in US consumer banking, and closed or sold 54 businesses since he took the top job in 2011, as he focuses on markets where the bank is most profitable. The bank has 55 million customers and 6,600 offices around the world.
Revenue, PPI
The Chinese economy has slowed for two straight quarters, extending its longest streak of sub-8 per cent expansion in at least two decades.
HSBC shares fell 4.3 per cent to 722.6 pence. The stock has still gained 12 per cent in the year to date.
Loan impairments dropped 35 per cent to $3.1 billion. Revenue excluding businesses that have been sold and gains and losses on the value of the bank's debt rose 4 per cent to $33.3 billion. Operating expenses fell 13 per cent to $18.4 billion as wage costs declined.
The lender set aside $367 million to compensate consumers sold loans insurance they did not want, need or understand. Barclays Plc set aside 1.35 billion pounds ($2.1 billion) in the same period.
"Economic growth remained muted and regulatory changes continued to impact available returns," Gulliver said in the statement.
'Highly Damaging'
The lender's investment banking business, led by Samir Assaf, posted pretax profit of $5.72 billion, up from $5.05 billion a year earlier, on reduced costs and impairments. That beat the $5.48 billion estimate from Citigroup Inc analysts led by Andrew Coombs.
"The board is committed to protecting the competitive position" of operations affected by the proposed EU pay restrictions, HSBC said on Monday.
The lender, which last year agreed to pay $1.92 billion to settle US probes of money laundering, said in May it will eliminate as many as 14,000 more jobs, as it plans to cut an additional $3 billion of costs to improve profitability.
HSBC completed the sale of its US credit-card unit to Capital One Financial Corp for a premium of $2.5 billion in May 2012, and sold a $3.2 billion portfolio of US consumer loans in March. The lender is cutting back in the US after its 2003 purchase of Household International Inc required it to set aside more than $65 billion for souring loans in the country.
Asset sales
The pace of asset sales will now slow, Gulliver said on Monday. As well as the loans portfolio and cards business, HSBC closed the sale of its upstate New York branch network to First Niagara Financial Group Inc in the first half of last year.
Last week, the bank appointed PricewaterhouseCoopers LLP as auditor, dropping KPMG LLP after more than two decades. KPMG won the business in 1991 without going through a bidding process, the lender in March. HSBC paid the accounting firm $80.5 million in 2012 for work including audit, tax compliance, computer security and help valuing assets.
Last month, James Comey, former US Deputy Attorney General, who the bank hired in January as a non-executive director and member of its panel to combat financial crime, resigned to lead the Federal Bureau of Investigation.
