HSBC bad loan provisions up; Unveils $3bn buyback for Q1

(Sharecast News) - Asia-focused bank HSBC on Tuesday lifted its bad loan provisions in the first quarter, blaming a bleak macroeconomic outlook from higher tariffs and geopolitical tensions as it also announced a $3bn share buyback. The lender said it now expects credit losses of $876m, an increase of $202m, with $100m set aside to cover Hong Kong's commercial property sector.

Pre-tax profits were down by a quarter to $9.5bn in the first three months of the year, better than analyst expectations of $9.1bn. Last year's $12.7bn was boosted by one-off gains related to the sales of its Canada and Argentina operations.

Net interest income fell to $8.3bn from $8.7bn, reflecting lower rates.

"The macroeconomic environment is facing heightened uncertainty, in particular from protectionist trade policies, creating volatility in both economic forecasts and financial markets and adversely impacting consumer and business sentiment," the bank said.

The bank last year unveiled plans to merge two of its three major divisions, dividing operations between an "Eastern Markets" branch, combining Asia-Pacific and the Middle East, and a "Western Markets" branch, comprising the non-ring-fenced UK bank, European markets, and North America.

Richard Hunter, Head of Markets at Interactive Investor said: "HSBC is already shuffling its pack to prepare for growth in its most profitable areas, but now faces the additional distraction of anticipating a deteriorating global backdrop."

"As such, its guidance comments are revealing but unsurprising. The group fully recognises that heightened uncertainty and a faltering economic outlook are already having a negative effect on business and consumer sentiment in its core regions."

"The reorganisation will also bring costs of $1.8bn over the next two years, although they should then settle at ongoing annual savings of $1.5bn. Prospects nonetheless remain bright, with the Hong Kong, International Wealth and Premier Banking business and the trading unit within Commercial and Institutional Banking continuing to bear fruit. "

"This has been recognised in a share price which has risen by 26% over the last year, as compared to a gain of 3.4% for the wider FTSE100 and over the last three years the signals have been even stronger, with a 69% increase in the price."

Reporting by Frank Prenesti for Sharecast.com