HSBC Holdings Plc Misses Profit Forecasts


The share price of HSBC (LSE: HSBA) (NYSE: HSBC.US) fell by 23p to 632p during early trade this morning after the firm reported a 9% rise in profit for last year, which missed market expectations. The 3% fall in its share price made it the leading loser among FTSE 100 blue-chips.

The bank reported profits of $22.5 compared with $20.6bn in 2012, boosted by a range of cost-cutting measures. In total the bank made $1.5bn in savings by, among other things, reducing jobs as well as cracking down on the number of staff taking business-class flights.

The bank currently employs 254,000 full-time staff, down from 295,000 at the beginning of 2011. In total $4.9bn has been saved since 2011, exceeding targets set by the bank.

Revenue was stable, coming in at $63.3bn compared with $61.6bn in 2012, underpinned by a “resilient” performance in the global banking & markets business, as well as growth in the commercial banking division.

Pay for chief executive Stuart Glover increased last year from $7.5m to $8m while the bonus pool increased 6% to $3.9bn.

The chief executive commented:

“Our performance in 2013 reflects the strategic measures we have taken over the past three years. Today the Group is leaner and simpler than in 2011 with strong potential for growth. In 2013 we grew underlying profits by US$6.3bn, generated US$10.1bn in core tier 1 capital, achieved an additional US$1.5bn of sustainable cost-savings and declared US$9.2bn in dividends in respect of the year. Our strong capital generation continues to support our progressive dividend policy and reinforces HSBC’s status as one of the best capitalised banks in the world.”

Earnings per share increased from 44p to 50p while the dividend was increased from 27p to 29p.

Therefore, taking into account the hit to HSBC’s share price earlier, the shares may therefore trade on a P/E of 13 and offer a potential income of 4.5%

Of course, the decision to ‘buy’ — based on those ratings, today’s results and the wider prospects for the banking sector — remains your own decision.

A guide to understanding banks

Now, while placing a valuation on bank shares isn't easy, it pays to have a diversified portfolio and adding a bank could reap rewards.

But where to start? How about with "The Fool's Guide To Investing In Banks".

We'll guide you through the difficult stuff step-by-step so you'll be well placed to make an informed decision.

Simply click here for your FREE report.

> Mark does not own shares in HSBC.