Home 5 News 5 HSBC 2016 profits plunge 62% to £5.7bn amid 'significant and largely unexpected economic and political events'

HSBC 2016 profits plunge 62% to £5.7bn amid 'significant and largely unexpected economic and political events'

HSBC’s pre-tax profits plummeted 62 per cent for 2016 due to one-time charges and “uncertainties” caused by “significant and largely unexpected economic and political events”, the bank said on Tuesday

Europe’s largest bank saw profit before tax slump to $7.1bn (£5.7bn) from $18.87bn in 2015, falling well short of the $14.4bn analysts had been expecting, according to Thomson Reuters data.

The bank said 2016 would “be long remembered for its significant and largely unexpected economic and political events”, alluding to the election of Donald Trump as US president and Britain’s vote to leave the EU.

“These foreshadowed changes to the established geopolitical and economic relationships that have defined interactions within developed economies and between them and the rest of the world,” chairman Douglas Flint said.

“The uncertainties created by such changes temporarily influenced investment activity and contributed to volatile financial market conditions.”

Chief executive Stuart Gulliver said in a statement that the bank had seen little impact from the Brexit vote on its business but said it still planned to relocate 1,000 of its 43,000 UK-based workers to Paris once Britain leaves the EU.

However, he said the bank has “broadly all the licences and infrastructure needed to continue to support our clients once the UK leaves the EU”.

“There will be 1,000 jobs that will have to move, because it would be unlawful for that work to be carried out from the UK, but I don’t think this is a problem for the city of London,” Mr Gulliver said.

Looking forward, he said “the outcome of the US election has added to concerns about a rise in protectionism”, which have been “accentuated in many parts of the world by technological change and income inequality”.

HSBC booked $3.2bn in impairment charges after writing off the goodwill related to its European private bank, Safra Republic, as well as the sale of its Brazilian operations. It also announced it would buy back $1bn of its own shares

“We have considered it appropriate to write off the remaining goodwill in the European private banking business,” it said, adding the restructuring of global private banking is now largely complete.

The $1bn share buy-back takes HSBC’s announced buy-backs since the second half of 2016 to $3.5bn following the bank’s disposal of its Brazil unit in July last year in a $5.2bn deal.

HSBC’s shares have been among the best-performing European bank stocks since Britain voted in June to leave the European Union, climbing 53 percent against a 28 percent increase in the STOXX Europe index of 600 banks .SX7P as the bank benefited from appreciation of the U.S. dollar and stronger capital levels.

Additional reporting by Reuters

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