HSBC reports 5% jump in first-half profit helped by cost-cutting

HSBC's first-half profit rises 5 per cent, beating forecasts

The banking giant said pre-tax profit rose 5% to 10.2 billion USA dollars (£7.8 billion) in the first six months of the year, ahead of expectations, as the lender hailed a strong performance across its main divisions. Reported revenue, however, dipped 11 percent to $26.2 billion, partly on the back of currency headwinds. It did not benefit this time from a favourable change in the value of its own debt.

"As central bank interest rates edged higher, led by the U.S., we began to benefit from improved margins on our core deposit bases, providing a welcome enhancement to the group's revenue mix, given the likely trajectory of interest rates over the medium term".

The positive earnings report comes as Douglas Flint prepares to step down as HSBC's chairman in October. Interested investors should note that this latest move takes the amount of buy-backs pledged since the second half of 2016 to $5.5bn.

Profits in Asia, its most lucrative market, rose 7% to $7.6 billion over the first half of the year, the bank said, while adjusted profits from its global banking and markets division rose 28.4% to $3.4 billion, almost matching the bottom line from its giant commercial banking division.

HSBC said its common equity tier 1 ratio - a measure of financial strength - was 14.7 per cent at the end of June, the highest among major European banks.

HSBC is to buy back $2 billion of its shares after reporting a 5 per cent rise in half-year profits, and said repurchases of its stock could become a regular feature in the future. "Where we have excess capital, we are open to returning it to shareholders", said chief executive Stuart Gulliver.

"You could argue there is a more focused, logical, cohesive set of businesses that remain and there is absolutely growth" on show at HSBC now, Gulliver said on a call with analysts.

Since the financial crisis in 2008 Europe's largest bank has cutting jobs and selling assets to streamline the business and reduce costs to make the group more profitable, while still making dividend payments to shareholders. At the 2015 strategy day, Mr. Gulliver laid out an aim to get revenue growth in its global network above GDP, and said he tracks the estimated figure every two weeks. Mr. Flint is leaving in September and will be replaced by Mark Tucker, former CEO of AIA Group Ltd. Mr. Gulliver has said he would leave next year after a new CEO is named.

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