HSBC upbeat on Asia as profit hits $22 billion

HSBC Holdings Plc, Europe's biggest bank, predicted growth in Asia and other emerging markets would outweigh sluggish European economies this year as it posted a $21.9 billion profit for 2011, the best outturn by a western bank so far. HSBC added, however, that success in emerging markets was becoming increasingly expensive, with costs rising 10 percent, or $3.9 billion - a third of that due to higher pay.
HSBC has been relatively unscathed because it makes more than three quarters of its profits outside Europe and north America. It remained upbeat on Monday about prospects for emerging markets despite fears that some are overheating and could see an abrupt slowdown in growth this year.
"We remain comfortable with the emerging markets (outlook) and are confident that GDP growth in emerging markets will be positive and China will have a soft landing," Chief Executive Stuart Gulliver told reporters on a conference call. "We think there's some recent buoyancy in the US, so the real issue of negative focus is how the euro zone plays about," he added, predicting the euro zone economy would flatline this year, with "marked recessions" in some southern countries.
HSBC, with around 7,200 offices in 80 countries, said pretax profit rose 15 percent to $21.9 billion in 2011, just below analysts' average forecast of $22.2 billion in a Reuters poll. The figure fell short of the group's record profit of $24.2 billion in 2007, but beat all other western banks that have reported so far for last year, including US rival J.P. Morgan , which made a $19 billion profit.
The world's most profitable banks in recent years have been China's ICBC, which made $32 billion in 2010, and China Construction Bank, which made $26.4 billion. HSBC's profits were boosted by a $3.9 billion accounting gain on the value of its debt. Stripping that out, underlying pretax profit fell 6 percent to $17.7 billion, due in part to rising wages in emerging markets and to restructuring costs.
Gulliver, who is reshaping HSBC to cut annual costs by $3.5 billion, lift profitability and sharpen its focus on Asia, said he would step up his plan this year. At 0945 GMT, HSBC shares in London were down 1.5 percent at 566.1 pence, lagging a 0.7 percent decline in the UK's benchmark FTSE 100 index. The shares have beaten the STOXX Europe 600 banking index by 15 percent over the past year.
HSBC said profits at its investment bank fell 24 percent to $7 billion, hurt as the euro zone debt crisis slowed capital markets activity in the second half of last year. Loan impairment charges and other credit risk-related provisions, however, fell $1.9 billion to $12.1 billion.