HSBC has seen a dramatic fall in its share prices following reports of poor profit performance.
HSBC Annual Profits Slump, Shares Fall Steeply
HSBC bank reported pretax profits of $7.1bn for 2016, a 62% fall from a year earlier when it recorded an $18.9bn profit.
The bank has said the fall in profits could largely be attributed to one off charges such as the sale of its branches in Brazil.
Even then, the financial institution said its performance was generally satisfactory against the background of unstable market conditions. It also expressed concern over the increase in protectionism, which is an emerging global trend.
At the same time, HSBC announced a share buyback that was much smaller than anticipated. This triggered a slump in share prices in London by a whopping 5%.
Chris Wheeler, an Atlantic Equities bank analyst said, “This is a bank that remains in transition following the crisis.”
He added that there is a possibility that this could be the last report from the bank featuring large one off charges, writing down asset’s values and reshuffling the business structure.
Earlier, HSBC said the year 2016 would be remembered for its unexpected political and economic events in relation to the UK’s Brexit vote and the US presidential elections.
Douglas Flint, HSBC chairperson said, “These events predicted changes to the established economic and geopolitical relationships within advanced economies and between these economies and the rest of the world.”
He added, “The uncertainties brought on by these changes had an impact on investment activities and triggered further volatility in the financial markets.”
The bank said that the election of Donald Trump as the US president has continued to raise fears over protectionism. Other factors such as income inequality and technological changes experienced globally are also contributing to the rise in protectionist tendencies.
HSBC raised concerns that an increase in this trend would likely disrupt global trade and have negative implications for the bank’s businesses.
Last year, the bank said its headquarters in Europe would remain in London in spite of the uncertainty caused by the Brexit vote.
Announcing the annual financial results, Mr. Flint indicated that according to the bank’s ongoing plans, up to 1,000 employees might need to be move to Paris from London by 2019.
The bank said it had the necessary infrastructure to continue to serve its clients in the UK after Britain exits the European Union.
Shareholders had anticipated a $2.5bn to $3bn share buyback. As such, they were disappointed when the bank announced it would only buy back shares worth $1bn, according to Mike Amey of fund management company, Pimco.
Share buybacks usually help to boost a firm’s share prices.
Mr. Amey however said that the decline in HSBC share prices should be looked at from the point of view of a 50% climb in share value over the last year.