HSBC share price slumps as annual profit misses expectations

HSBC Holdings Plc (LON:HSBA) has reported a lower-than-expected annual profit amid challenging economic conditions with slowing growth in China and falling commodity prices.

Europe’s largest bank said today in its full-year report that its 2015 pre-tax profit had risen one percent to $18.8 billion (£13.2 billion). This figure was significantly below the average analyst forecast of $21.8 billion, according to Thomson Reuters data. The earnings were hit by an unexpected pre-tax loss of $858 million in the fourth quarter. The bank also reported a 17 percent increase in loan impairment charges to $3.7 billion.HSBC’s adjusted revenue was $57.8 billion in 2015, up one percent from the previous year.

HSBC’s chief executive officer, Stuart Gulliver, commented: “Targeted investment, prudent lending and our diversified, universal banking business model helped us achieve revenue growth in a difficult market environment, whilst also reducing risk-weighted assets.”
Gulliver added that HSBC had made a “good start” in implementing the plans it unveiled last June, when it vowed to cut 25,000 jobs and exit non-core assets as part of a push to boost profitability and increase its focus on China. “Delivering against these plans remains our primary focus,” Gulliver said.
HSBC’s chairman, Douglas Flint also confirmed that the bank remains committed to its ‘Asia pivot’ strategy, though he also acknowledged that the economic slowdown in China was making the economic environment more challenging.
“China’s slower economic growth will undoubtedly contribute to a bumpier financial environment, but it is still expected to be the largest contributor to global growth as its economy transitions to higher added value manufacturing and services and becomes more consumer driven,” Flint said.
In today’s trading, HSBC shares tumbled four percent to 431.85p, as of 08:20 GMT. The stock has fallen 19.5 percent since the start of the year and the company’s market capitalisation currently stands at £84.5 billion.
As of February 20, 2016, the consensus forecast amongst 27 polled investment analysts covering HSBC had it that investors should hold their position in the company. The same consensus estimate has been maintained since January 20, 2016, when the sentiment of investment analysts deteriorated from “outperform”.
As of 09:59 GMT, Monday, 22 February, HSBC Holdings plc share price is 432.20p.