Banking giant HSBC said yesterday that net profits surged 58 per cent to more than $4.15 billion in the first quarter on lower taxes and bad debt charges.
But Europe’s biggest bank added that the group’s pre-tax gains were pushed down by rises in other exceptional costs, including money set aside to compensate customers in Britain who were mis-sold payment-protection insurance.
Europe’s biggest bank said that profit after tax for the three months to March 31 rocketed to $4.153 billion (€2.88 billion) from $2.631 billion in the first quarter of 2010.
Adjusted pre-tax profit fell to $5.5 billion from $6.01 billion. It was also below analysts’ expect-ations of about $6 billion, according to a survey by Dow Jones Newswires.
“Underlying profits held up well against a strong first quarter (in) 2010,” HSBC’s new chief executive Stuart Gulliver said in an earnings statement published by the London-headquartered bank.
“We were profitable in all regions and customer groups, profits increased in each of our faster-growing regions and credit quality improved.
“There was double-digit revenue growth in many of our businesses in the faster-growing regions. We continued to increase customer lending in all regions, except North America, with strong growth in Asia and Latin America,” Mr Gulliver added.
HSBC said that provisions set aside for bad loans dropped 37 per cent to $2.4 billion in the quarter. But its cost-income ratio, or costs relative to income, rose to 60.9 per cent, well above the group’s target.
The rise reflected $440 million set aside to compensate clients mis-sold payment-protection insurance (PPI), as well as changes in the value of HSBC’s debt.
The bank, which yesterday said costs would have been flat without the exceptional charges, wants to reduce the ratio to 52 per cent or less within two years.
In reaction to the results, shares in HSBC dropped 1.60 per cent to 641.3 pence on London’s benchmark FTSE 100 index, which was down overall in morning trade.
“The update is something of a mixed bag, allowing investors’ attention to move on to the strategic update later in the week,” said Richard Hunter, head of UK Equities at Hargreaves Lansdown Stockbrokers.
HSBC publishes a key strategy review on Wednesday and analysts have said that Gulliver, who took over the helm of Europe’s biggest bank in January, could use the event to announce major cost-cutting measures.