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Published: Wed, February 22, 2017
Science | By Carlton Santiago

HSBC reactionsHSBC profits plummet: This is how analysts reacted

HSBC reactionsHSBC profits plummet: This is how analysts reacted

Shares in HSBC had dropped more than 6% in late-morning trading today after the United Kingdom lender reported a 62% fall in profits for 2016.

Shares in the bank dropped 4.5 per cent at the open after HSBC revealed a series of one-off hits had eroded its bottom line past year.

The bank reported full-year profits of $7.1 billion (£5.7 billion) for 2016, well down on the $18.9 billion it made the previous year, and the $14.4 billion investors had been expecting.

The drop in profits reflected a $3.2bn impairment of goodwill in the company's global private banking business in Europe and the impact of the sale of its operations in Brazil.

HSBC Holdings yesterday reported a 62 per cent slump in annual pre-tax profit that fell way short of analysts' estimates as the British bank took hefty write-downs from its restructuring, sending its Hong Kong shares down 3.5 per cent.

Douglas Flint, HSBC's chairman, said that "unexpected economic and political events" were partly to blame and looked to a future of "a rise of protectionism". HSBC operates in over 70 countries, and its exposure to emerging markets could be deleterious given President Donald Trump's protectionist stance.

One-off items sank HSBC today.

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In January past year, HSBC said it was looking to launch an investment advice arm that would cater for individuals with less than £50,000 to invest, adding to the retirement advice service it launched in 2015.

Many analysts attributed the bank's poor performance to the after-effects of that meltdown - major banks have been forced to move away from riskier areas of finance, and rock bottom interests the world over have damaged profit margins.

Moreover, HSBC has been mired in scandal ever since the financial crisis; in 2016, the bank was fined by the EU Commission for rigging Euribor rates, as well as being embroiled in a lawsuit for failing to apply money laundering controls, to the benefit of drug cartels in Mexico. "We are gaining market share in areas of importance to HSBC as others scale back and our offerings become more competitive".

The bank has increased its cost-cutting target by $1bn to $6bn of savings, while cautioning it faces more than $3 bn of revenue headwinds in 2017, including currency movements and record-low interest rates in the UK.

As a outcome of the poor results, shares in the bank dropped like a stone as European markets opened.

As if that was not enough the bank has also received requests for information from various regulatory and law enforcement authorities around the world concerning persons and entities believed to be linked to Mossack Fonseca & Co., which the bank says could be significant.

HSBC head also touched on Brexit and reaffirmed earlier reports that "current contingency planning suggests we may need to relocate some 1,000 roles from London to Paris progressively over the next two years, depending on how negotiations develop".

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