Wednesday, November 9, 2011

HSBC says may leave UK as markets hit profits

LONDON (Nov 9): HSBC said costly new capital rules might force it to leave the UK, as it reported a bigger-than-expected fall in third-quarter profit, hit by lower investment banking income and higher bad debt in the United States.

Shares in Europe's biggest bank fell by more than 5 percent in early trading on Wednesday, after HSBC said its underlying pretax profit was 36 percent lower at $3 billion in the three months to the end of September.

"Trading conditions showed some improvement during October, but they remain very difficult and continuing turbulence in global markets may result in further downside risk," the bank said in a regular earnings statement.

HSBC Chief Executive Stuart Gulliver aims to cut annual costs by $3.5 billion and sharpen the bank's focus on Asia, quitting countries where the bank lacks scale in an attempt to revive profitability.

By 0922 GMT, HSBC's London-listed shares were 4.4 percent weaker at 513.7 pence. The stock has fallen more than 20 percent this year -- still not as bad as a 31 percent drop in the wider DJ index of European banks .

"Underlying Q3 performance was shy of market expectations,@ CSC Research analysts said in a note.

"Subdued trading outlook due to continuing turbulence in global markets and expectations of 'soft landing in China' do not bode well for the equity story," they said.

The bank also had a shot at the City of London, saying the cost of UK regulatory reform could be as high as $2.5 billion, and that it might move its headquarters out of the country where it has been based for the last 20 years or so.

HSBC said loan impairment charges and other credit risk provisions were $0.7 billion higher at the end of the quarter compared to a year ago, which was mainly due to an increase in its run-off portfolio in North America.

The increase was largely linked to the moratorium on foreclosures in the United States, HSBC said.

Its cost efficiency ratio so far this year also worsened, to 54.6 percent from 54.0 percent last year, while it had reduced headcount by 5,000 since the first quarter.

"The outlook for the global economy is very challenging as problems in developed markets begin to affect growth rates around the world," HSBC said. - Reuters

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