HSBC shares tumble as profit disappoints

Monday, 5 Aug 2013 | 1:13 PM ET
Adam Jeffery | CNBC

HSBC, one of the world's largest banks, suffered a hit to its share price on Monday morning after posting disappointing results.

Larger than anticipated impairments and a lower capital 1 tier ratio than hoped helped send the share price tumbling, according to analysts. Shares closed down by over 4 percent.

HSBC delivered slightly worse than forecast profits of $14.1 billion for the first half of 2013 as chief executive Stuart Gulliver's cost-cutting campaign continued.

Gulliver said in a statement: "These results demonstrate that we have continued to make progress on delivering our strategy."

(Read more: HSBC Could Cut 14,000 More Jobs In War on Costs)

The bank was expected to report pre-tax profit of $14.6 billion for the half-year, according to a Reuters poll. Profit was up 10 percent from the same period in 2012.

"Quality looks very poor in the results," Ed Salvesen, equity analyst at Brewin Dolphin, told CNBC.com. "Overall I think there will be some downgrades following this."

He highlighted larger-than-anticipated impairments - particularly in Latin America, where charges reached $1.4 billion - as one of the factors causing concern in the market.

Hong Kong banks: To HSBC or not to HSBC?
Ismael Pili, Head of Financials Research, Asia at Macquarie Securities, compares HSBC and Standard Chartered ahead of the banks' earnings reports.

Salvesen added that the market had been hoping for a higher capital build than the reported 10.1 percent common equity tier 1 ratio (the measure which will be used to monitor the bank's financial health under new European banking reforms).

(Read more: HSBC: Why We Are Still Bullish on China)

Revenues for the six months to the end of June improved, coming in $34.37 billion, but below an expected $34.8 billion.

Part of the reason for this improvement was a better picture on its bad loan book, with loan impairment charges and other credit risk provisions were down to $3.1 billion, compared to $4.8 billion in the first half of 2012.

After a scandal over money-laundering in Mexico, which cost HSBC almost $2 billion to settle, the bank has beefed up its regulatory and financial crime compliance units by 1,600 employees.

The bank issued a warning about proposed U.K. banking reforms in its results statement. It said the mooted changes will be "challenging to implement" and warned of potential "unintended consequences."

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