HSBC has warned about a weaker global economic outlook, as the slowdown in China, trade tensions and fears around Brexit hit its revenues towards the end of the year.
Europe’s biggest bank reported a 16% rise in 2018 profits to $19.9bn (£15.4bn), disappointing the City, where analysts had been expecting nearer $22bn. Revenues in the fourth quarter, which was marked by turmoil in global financial markets, fell 8% from the previous quarter. In Asia, profits grew 16% to $17.8bn – nearly 90% of the total.
HSBC said it had increased its impairment provision by $165m to cover credit losses related to the economic uncertainty around Brexit. Its chief financial officer, Ewen Stevenson, said this reflected the increased risk of a hard Brexit, and that government contracting, high street retailers and some restaurant chains were particularly vulnerable to the UK crashing of the EU without a deal.
Presenting his first annual results, the HSBC chief executive, John Flint, said the fourth quarter had been “undeniably weak” and that there were more risks to global economic growth than this time last year.
He added: “Many of our UK customers are understandably cautious about the immediate future, given the prolonged uncertainty surrounding the UK’s exit from the European Union.”
The bank has set up new branches of HSBC France, its main banking entity in the EU, to which it is moving some customers, and is expanding its product ranges in France, the Netherlands and Ireland.
Flint has largely stuck to his predecessor Stuart Gulliver’s Asia-focused strategy, and said HSBC would continue to invest in Asia, albeit at a slower pace. He acknowledged that growth in loans to Asian customers slowed sharply to 5.5% in the final three months of 2018, down from double-digit rates of the previous year.
He said an increase in US tariffs on $200bn of Chinese imports could cause significant disruption to supply chains. “Clearly a ratcheting up of tariffs to 25% wouldn’t be good for the region.”
The bank plans to lift the salaries of its executive directors by 3.3% this year, which it says it in line with the average pay rise for its UK employees. This is the first base salary increase for its directors since 2011. Flint was paid £4.6m in his first year as chief executive while Gulliver received £2.4m, according to HSBC’s annual report.
