HSBC earnings come in below forecasts after costs increase
HSBC Holdings, Europe's biggest bank by market value, posted full-year earnings that missed analysts' estimates after an "unacceptable" increase in costs, and said it would reduce its profitability target.
Net income more than doubled to $13.2bn (€9.5bn) in 2010 from $5.83bn the previous year, missing the $13.7bn median estimate of 15 analysts surveyed by Bloomberg.
HSBC's cost-income ratio rose to 55.2pc from 52pc as rising staff costs outpaced revenue growth, the London-based bank said yesterday.
Stuart Gulliver, in his first earnings since being named chief executive in September, cut the bank's target for return on equity, citing an uneven global economic recovery and regulators' efforts to make banks hold more capital in reserve following the financial crisis.
HSBC would target a return on equity of 12pc-15pc instead of 15pc-19pc, the lender said.
"The reduction in HSBC's return on equity is worrying," said Jane Coffey, head of UK equities at Royal London Asset Management, which manages $51bn including HSBC stock.
"People are questioning the premium HSBC trades at if they are not going to make higher returns."
The shares closed down 4.7pc at 678 pence in London trading, their steepest decline in almost a year.
HSBC's cost efficiency ratio is "above our target range and unacceptable", chairman Douglas Flint said. "We need to re-engineer the business to remove inefficiencies."
He declined to address how the bank plans to cut costs, saying HSBC would hold a briefing on strategy in May. (Bloomberg)