Europe's largest bank says its quarterly profit jumped 31%

Key Points
  • Europe's largest bank, HSBC, reported first-quarter earnings on Friday that  beat expectations.
  • HSBC said its reported profit before tax in the first quarter was $6.213 billion, a 30.7% jump from a year ago.
  • Its revenue for the quarter was $14.428 billion, an increase of 5.24% year-over-year.
A pedestrian walks past illuminated signage for HSBC Holdings Plc displayed outside a bank branch in the Central district of Hong Kong, China.
Anthony Kwan | Bloomberg | Getty Images

HSBC, Europe's largest bank, reported first-quarter earnings on Friday that beat expectations.

The bank said its reported profit before tax in the first quarter was $6.213 billion, a 30.7% jump from last year's $4.755 billion. Analyst forecasts compiled by Refinitiv showed that the bank's reported profit before tax was expected to come in at $5.399 billion for the January to March period.

HSBC's revenue for the quarter was $14.428 billion, 5.24% higher than last year's $13.71 billion. Refinitiv's estimate for revenue had been $13.788 billion.

HSBC's Hong Kong-listed shares ended Friday's trading session 2.12% higher, reversing earlier losses. The stock performance for the year is up by around 7.56%. Meanwhile, the bank's London-listed shares have lost around 3.22% so far this year.

Chief Executive John Flint attributed the improvement in earnings to "strong revenue growth" in the retail banking and wealth management, and commercial banking businesses.

"These are an encouraging set of results," Flint said in a statement accompanying the financial results announcement.

Other financial metrics that analysts and investors were watching include:

  • Net interest margin, a measure of lending profitability, was 1.59% as of March 31. That's lower than 1.66 at the end of 2018 and 1.67% in March last year.
  • Earnings per share was $0.21, up from $0.15 in March 2018.
  • Reported operating expenses declined by 12% from a year ago.

The fall in expenses helped HSBC returned to "positive adjusted jaws" of 6% in the first quarter. The jaws ratio is positive when revenue grows faster than costs. Investors had been watching for the bank's progress in containing costs, especially after it failed to achieve its target of positive jaws last year. HSBC ended 2018 with jaws of minus 1.2 percent.

The bank announced a dividend of $0.10 per ordinary share. It added that it will announce its decision on 2019 share buybacks at its next earnings release.

HSBC, headquartered in London, earns most of its profits from Asia. A number of its U.K. banking peers such as Barclays and Royal Bank of Scotland in recent weeks reported declines in first-quarter profits.

But Standard Chartered, a fellow British bank with a focus on emerging markets including Asia, reported a 10% jump in quarterly profit.