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HSBC Holdings pre-tax profit tumbles

But commercial banking, retail banking and wealth management divisions perform strongly in the first

HSBC Holdings, parent company of the HSBC Group, has posted a profit before tax (PBT) of $4.32bn for the first quarter ended 31 March 2012, down from $4.91bn for the same period last year.

Compared with the first quarter of 2011, revenue rose strongly in the company's faster-growing areas, notably in Latin America (7 per cent), Hong Kong (16 per cent) and the rest of the Asia-Pacific region (18 per cent). Overall, however, net operating income before loan impairment charges and other credit provisions slumped year-on-year to $16.2bn (2011: $17.04bn). 

Net operating income was $13.84bn (2011: $14.67bn). Operating expenses of $10.4bn were broadly in line with those of last year.

Retail banking and wealth management reported PBT of $2.18bn (2011: $960m). Commercial banking posted a PBT of $2.2bn (2011: $1.94bn), while the global banking and markets division's PBT totalled $3.08bn (2011: $2.93bn).

Global private banking brought in a net operating income of $820m (2011: $853bn).

Underlying PBT for the quarter increased by 25 per cent to $6.8bn. Underlying cost efficiency improved from 58.7 per cent to 55.5 per cent, driven by increased revenues.  

Stuart Gulliver, group chief executive said: 

We have had a good start to the year. Reported PBT for the quarter was $0.6bn down compared with Q1 2011 but underlying PBT increased by $1.4bn, driven by increased revenues in global banking and markets and commercial banking. We also increased retail banking and wealth management revenue in faster-growing regions. Our underlying cost efficiency ratio improved from 58.7 per cent in Q1 2011 to 55.5 per cent in Q1 2012.

Underlying PBT was up by $3.4bn on the preceding quarter, largely driven by a typically strong first quarter revenue performance by global banking and markets which tends, like its industry peers, to perform well in the quarter. In addition, loan impairment charges reduced significantly compared with Q4 2011, mainly in North America and Europe, and operating expenses fell following a reduction in the size and number of notable cost items. 

We continued to make good progress in implementing our strategy, with 11 transactions to dispose of or close businesses announced since the start of 2012, and we continued to position the business for growth with increased revenues in Hong Kong, Latin America and Rest of Asia-Pacific against the previous quarter. We also continued to reduce costs, recording $0.3bn of sustainable cost savings in Q1 2012, which takes the total annualised savings achieved to $2bn.

Though the company's performance in April was "satisfactory", Gulliver warned that "markets remain volatile with high levels of debt and regulatory and political uncertainty in developed economies, contrasting with an encouraging outlook in faster-growing markets".