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HSBC profits rise in 2019 but last quarter hit by trade jitters

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Banking giant HSBC said on Tuesday that pre-tax profit rose last year but it suffered a bruising final quarter as worries over the global economy and the US-China trade war began to bite.

The London-headquartered behemoth told investors it was still aiming to meet targets despite the looming twin storms of Brexit and the long-running trade impasse between Washington and Beijing.

But analysts warned it remained vulnerable to any fallout from either issue becoming a full-blown crisis in the year ahead.

Overall the year saw strong growth for HSBC with profits before tax up 16 percent at $19.9 billion, net profit ballooning 30 percent to $12.6 billion and adjusted pre-tax profit rising three percent to $21.7 billion.

The results capped the first full year at the helm for chief executive officer John Flint, who has vowed growth while keeping a lid on costs.

But the yearly growth figures were dampened by a tough final quarter when the markets — especially those in Hong Kong and China — went into meltdown over global trade fears.

Adjusted pretax profit fell one percent to $3.39 billion in October-December, missing the $4.4 billion consensus average by Bloomberg News derived from estimates compiled by the bank.

Global markets adjusted revenue slipped $202 million to $1.1 billion over the same period, while wealth management dropped 18 percent, also to $1.1 billion in what the bank said was a “challenging external environment in the fourth quarter”.

Analyst Dickie Wong from Kingston Securities said the bank missed estimates towards the end of the year partly because China and Hong Kong are its “most relied (on) market”.

“The slowing down of the economy, the trade war between China and the US also remain an uncertainty. That’s why it missed estimates,” he told AFP.

– Political pressure on trade –

Jackson Wong, of Huarong International Securities, said revenues were also a little underwhelming.

“One of the key things I see is their revenue didn’t grow as much as they were expecting, so that their cost efficiency is not improved as expected,” he told AFP.

The firm’s Hong Kong-listed shares were down 1.6 percent in afternoon trade.

In a statement attached to Tuesday’s earnings, the bank’s leadership said they were prepared to weather fallout from any failure of the the trade talks and Britain’s impending departure from the EU.

“The fundamentals for growth in Asia remain strong in spite of a softer regional economic outlook,” chairman Mark Tucker said in a statement attached to the annual report.

“The system of global trade remains subject to political pressure, and differences between China and the US will likely continue to inform sentiment in 2019,” he said.

He added that progress on trade deals between the EU, Singapore and Japan — as well a large deal among Pacific trading nations — helped cushion those jitters.

With Brexit looming, HSBC followed the other major British financial giants in ring-fencing its UK bank in 2018.

“We continue to prepare for the UK’s departure from the EU”, Flint said, adding its operations in France “gives us a major advantage in this regard”.

Analysts have said that while Britain crashing out of the EU with no deal in place would hit banks hard, HSBC is more insulated than many of its British competitors partly because so much of its business is based in Asia.

HSBC posted a healthy doubling of profits in 2017 but it faced some troubling years before that.

The bank had to lay off tens of thousands of staff as part of a wide-ranging overhaul that also saw it sell its Brazil operations in 2015 and also had to pay out huge money laundering penalties earlier in the decade.

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