HSBC to Buy Back More Shares After Net Loss Widens--3rd Update

By Margot Patrick and Joanne Chiu 

HSBC Holdings PLC shares fell 6% after it reported unexpectedly weak fourth-quarter results and said shifting attitudes toward globalization could affect its business.

Executives at the bank said a changed U.S. stance on global trade, the rise of populism in Europe and Britain's planned exit from the European Union have added uncertainty in HSBC's key markets. They gave a mixed outlook for 2017, saying rising rates will help it in the medium term but that revenues in the U.K. and emerging markets are being dented by a strong dollar.

The stock has gained around 50% in a year, mainly on hopes that future U.S. interest-rate rises would lift margins and revenue. HSBC's fourth-quarter earnings fell short of analyst expectations because of a series of one-off items, but also reflected margin pressures in some businesses. Its net loss widened to $4.23 billion in the three months to end-December from $1.33 billion in 2015's fourth quarter. Full-year net profit sank to $2.48 billion from $13.52 billion.

Chief Executive Stuart Gulliver said political change could shift global trade into regional blocs, while predicting London will remain the "dominant financial center" in the region even after some business relocates to the EU because of Brexit. HSBC repeated its plans Tuesday to move around 1,000 jobs to Paris in the next two years.

There was some good news for investors. HSBC said it would buy back as much as $1 billion in shares, adding to $2.5 billion bought back last year, and left the door open for further buybacks as capital is freed up at its U.S. business this year. The bank is among the most strongly capitalized in Europe.

HSBC has undergone a major restructuring since 2011 under the leadership of Mr. Gulliver and Mr. Flint, exiting from most of Latin America and placing more focus on Asia. Mr. Flint is set to step down after a replacement is announced this year, and then the new chairman will seek a successor to Mr. Gulliver. Mr. Gulliver said Tuesday that Mr. Flint might not depart until 2018.

HSBC's struggles to get on top of its financial crime fighting systems continued. It spent $1.6 billion on implementing "global standards"--anti-money laundering systems and controls used across the bank--but the monitor overseeing its compliance with a 2012 U.S. legal settlement found continuing deficiencies.

HSBC agreed to pay $1.9 billion in 2012 to settle allegations by the U.S. Justice Department that it failed to catch money laundering and violated sanctions. The bank admitted to the failings and entered a five-year deferred prosecution agreement.

Mr. Gulliver said the monitor identified some potential failings in its U.K. anti-money-laundering controls at the end of 2016, causing the U.K. financial regulator to order a fresh review.

Write to Margot Patrick at [e-mail] and Joanne Chiu at [e-mail]

(END) Dow Jones Newswires

February 21, 2017 08:02 ET (13:02 GMT)

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