What HSBC Investors Learned as New CEO Flint Takes the Helm

(Bloomberg) -- HSBC Holdings Plc kick-started the U.K. bank earnings season with the final set of results for Chief Executive Officer Stuart Gulliver as John Flint assumes the role. The shares fell the most in a year in London trading as revenue and profit missed estimates for the fourth quarter.

Here’s some of the other things investors learned from the results of Europe’s biggest bank.

Share Buybacks

The bank was prohibited from buying back more of its shares because of a $5 billion to $7 billion debt-issuance program, but Finance Director Iain Mackay says they may be considered in the second quarter. Flint backed this up, telling investors on a conference call that there’s been no change to the lender’s policy on returning capital. HSBC has repurchased $5.5 billion since mid-2016 and analysts at UBS Group AG forecast another $4 billion this year.

Carillion, Steinhoff

HSBC became the latest global bank to take hits from the fallout of South African retailer Steinhoff International Holdings NV and British construction company Carillion Plc, a person familiar with the matter said. The firm’s loan impairment charges were about $188 million higher in the fourth quarter than a year earlier, “largely driven by two individual corporate exposures in Europe,” it said in a filing. Other than such notables, Mackay told investors that credit quality was stable.

Swiss Penalty

HSBC disclosed that various tax probes into its Swiss private bank could cost the company more than $1.5 billion. HSBC already paid about 300 million euros ($370 million) to settle a criminal investigation by the French government into allegations it helped clients evade taxes, the second-biggest corporate charge levied by an authority in the nation in November last year. At the end of last year, HSBC had provisioned about $604m for related penalties.

Markets Division

At the markets business, revenue in the fourth quarter fell 19 percent, driven by a 48 percent plunge in rates and a 24 percent drop in fixed income and currency trading. That was better than Wall Street peers that collectively posted a 30 percent drop in markets revenue in the final three months of the year.

U.S. Tax

Like many other global financial firms, HSBC took a hit from President Donald Trump’s changes to the U.S. tax rate, in its case a $1.29 billion loss. The firm’s common equity Tier 1 ratio fell to 14.5 percent from 14.6 percent at the end of September, still above its target range of 12 percent to 13 percent.

--With assistance from Gavin Finch

To contact the reporters on this story: Stephen Morris in London at smorris39@bloomberg.net, Jon Menon in London at jmenon1@bloomberg.net.

To contact the editors responsible for this story: Ambereen Choudhury at achoudhury@bloomberg.net, Paul Armstrong

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