HSBC share price tumbles as 2014 pre-tax profit misses forecasts

HSBC Holdings Plc (LON:HSBA) experienced a “challenging” 2014, in which higher costs and weaker-than-expected performance at the Global Banking and Markets unit hurt the company’s profit. The UK’s largest bank today reported its financial report for last year, which revealed that its reported pre-tax profit fell 17 percent to $18.68 billion, from $22.56 billion a year earlier. The result was worse that the $21.5 billion average estimate of 19 analysts polled by Bloomberg. The company’s investment banking arm saw a 38-percent fall in pre-tax profit to $5.9 billion.

HSBC’s operating expenses rose 6.1 percent in 2014 to $37.85 billion, which the lender attributed to“increased regulatory and compliance costs, inflationary pressures and investment in strategic initiatives to support growth”. Full-year revenue came in at $62 billion, slightly ahead of the $61.86 billion a year earlier.
HSBC’s chief executive officer Stuart Gulliver commented: “2014 was a challenging year in which we continued to work hard to improve business performance while managing the impact of a higher operating cost base.” He added: “Profits disappointed, although a tough fourth quarter masked some of the progress made over the preceding three quarters.”

Meanwhile, Gulliverhas been the subject of the latest headlines in the ongoing tax-dodging scandal surrounding HSBC’s private banking unit, after a report by the Guardian yesterday claimed that the CEO had £5 million in a Swiss account and that he was domiciled in Hong Kong. The report did not suggest that Gulliver had broken any rules.
HSBC subsequently issued a statement, confirming that Gulliver has a Swiss bank account, which he uses to hold his bonuses. The statement also confirmed that the HSBC chief was domiciled in Hong Kong, where he has spent “the majority of his nearly 35-year career at HSBC”.

“Since being posted to the UK from Hong Kong in 2003, Gulliver has paid full UK tax on the entirety of his worldwide earnings, less a credit for tax paid additionally in Hong Kong (where he is also tax resident) on that part of the same earnings doubly taxed,” a spokeswomen for HSBC said, as quoted by Reuters.
In today’s trading, HSBC shares tumbled 4.8 percent to 576.00p, as of 11:37 UTC, making the lender the biggest faller in the FTSE 100. The company’s market capitalisation currently stands at £111.1 billion.
According to the Financial Times, as of February 14, 2015, the consensus forecast amongst 39 polled investment analysts covering HSBC has it that investors should hold their position in the company. This stance has been maintained since 26 November, 2014, when the sentiment of investment analysts deteriorated from “outperform”.
As of 12:38 GMT, Monday, 23 February, HSBC Holdings plc share price is 569.15p.