HSBC Plc (HSBC) - Get HSBC Holdings PLC Sponsored ADR Report shares fell to the bottom of the FTSE 100 in London Friday after Europe's biggest bank posted a disappointing set of first quarter earnings figures under new CEO John Flint.
HSBC said pre-tax profit for the three months ending in March came in at $4.755 billion, a figure that missed analysts' forecast and fell 4% from the same period last year thanks to what the bank called "higher operating expenses", which rose 8% on a currency-adjusted basis to $8.2 billion, creating what banking analysts call a 'negative jaws ratio' where expenses rise faster than income.
"Our global businesses performed well in the first quarter, maintaining momentum from the end of 2017," said Flint. "We continue to benefit from interest rate rises and economic growth, particularly in Asia."
"Our primary focus is to grow the businesses safely, and we have increased investment to deliver that aim," Flint added. "We intend to deliver positive jaws for 2018."
HSBC shares were marked 3% lower in London trading and changing hands at 699.8 pence each, a move which takes the stocks year-to-date decline past 8.2%, outpacing the 5.1% fall for the Stoxx 600 Banks subindex over the same time period.
The results suggest Flint will need to convince investors that the bank's "pivot" to focus on developing markets in Asia will not result in a sustained rise in costs, largely in its retail divisions in Britain and China.
The stock however, has struggled to recover from the announcement of plans earlier this year to raise as much as $7 billion in new capital before it will consider any share buybacks.
HSBC said it will raise between $5 billion and $7 billion in the first half of this year as part of an ongoing effort to improve its capital base, which was pegged at 14.5% on a so-called common equity tier one ratio at the end of last year, and would look at further share buybacks "as and when appropriate" and "subject to the execution of targeted capital actions and regulatory approval".
That time appears to be rapidly approaching, as Flint told investors on a conference call Friday that "in light of the growth opportunities that we currently see" the firm would buyback $2 billion in shares in a program that would start "start soon."
The group returned around $3 billion to shareholders last year, HSBC said, and paid "more in dividends that any other European or American bank".