* Q1 pretax $6.8 bln, down 20 pct on year
* Latin America revenue weak, Asia stronger
* Investment bank profits dip 20 pct
* Shares down 1.4 pct
(Adds comments from CEO, finance director, analyst, details)
By Steve Slater
LONDON, May 7 HSBC's first-quarter
pretax profit fell 20 percent from a year ago to just under $7
billion, as revenue dropped in Brazil and at its investment
bank, while last year's earnings were swelled by asset sales.
Europe's biggest bank, which operates across 75 countries,
said revenue prospects were decent in Asia but weaker in Latin
America, where it has retreated from many markets after a
difficult few years.
"Latin America is under a bit of pressure, particularly in
Brazil. Overall Asia remains broadly constructive and everywhere
else is generally stable," Finance Director Iain Mackay told
analysts and reporters on a conference call.
Earnings in Latin America fell to $310 million in the
quarter, down a third from a year ago despite a 17 percent drop
in losses from bad debts there.
Chief Executive Stuart Gulliver has said he is in the second
phase of a turnaround aimed at making his bank less complex,
more nimble and efficient and able to deliver better returns and
dividends for shareholders.
HSBC's cost-efficiency ratio was 55.7 percent in the first
quarter, close to its target of mid-50s, but its return on
equity slipped to 11.7 percent, below its target of between 12
and 15 percent.
HSBC's London-listed shares were down 1.4 percent by 1050
GMT. Its shares are down 10 percent this year, underperforming a
2 percent rise by European banks as a whole.
"There are good bits going on in Asia, but not as good as
they once were, and there's revenue stability in Europe, but
revenue falls in Latin America and still a bit of a drag from
run-off portfolios," said Alex Potter, analyst at Mirabaud
Securities in London.
"It's a good company and there's a big yield, but HSBC is
one of those stocks for a rainy day and it's not raining that
hard at the moment," Potter said.
"NO LET UP" IN COST CUTS
Profits at HSBC's investment banking arm fell by a fifth
from a year ago to $2.9 billion, and are expected to drop from
that level this quarter due to what the bank said was muted
Analysts said that represented a resilient performance,
however, as most investment banks have seen a steeper drop in
profits after a grim start to the year for bond and
interest-rate trading, which HSBC is less reliant on. The bank
said it won market share in several areas, including equity and
debt capital markets and advisory.
Gulliver said profits at the investment bank - known as GBM
or Global Banking and Markets - in the second quarter were
likely to be near last year's $2.1 billion "because conditions
are tricky for most people and there's a seasonality to our
HSBC reported a group pretax profit of $6.8 billion, down
from $8.4 billion a year ago but just above the average forecast
of $6.6 billion from 13 analysts polled by the company.
Underlying profits, stripping out gains from disposals and
movement in the value of its own debt, reached $6.6 billion,
down 13 percent from a year ago.
The bank said it made $275 million of sustainable savings in
the first quarter, taking annual cost savings in the last three
years to more than $5 billion. It is aiming for further cuts of
between $2 billion and $3 billion in annual costs.
The bank has axed more than 40,000 jobs and sold or closed
60 businesses to lower costs, but said it added 1,100 jobs in
the first quarter, mainly due to beefing up compliance and
adding staff where it sees growth potential.
It said underlying operating costs rose by 2 percent from a
year ago, partly due to $100 million extra spent on risk and
compliance - mainly in Latin America and Asia.
(Editing by Matt Scuffham and David Holmes)