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HSBC CEO quits amid 'challenging global environment;' H1 profit up YOY to $8.51B

HSBC Holdings PLC announced the unexpected departure of Group CEO John Flint amid a "challenging global environment," while reporting a year-over-year rise in first-half attributable net profit.

The U.K. lender said Flint, who was also a director, will not carry out his day-to-day duties after Aug. 5 but will remain available to assist with the transition. Flint took on the role in February 2018 and was previously CEO of retail banking and wealth management.

Noel Quinn, head of global commercial banking, will be interim group CEO and executive director while the bank looks for Flint's replacement, who could be an internal or external hire.

"In the increasingly complex and challenging global environment in which the bank operates, the board believes a change is needed to meet the challenges that we face and to capture the very significant opportunities before us," Group Chairman Mark Tucker said.

The group reported a year-over-year rise in first-half profit attributable to shareholders of the parent company to $8.51 billion from $7.17 billion. EPS for the half increased on a yearly basis to 42 cents from 36 cents, as did annualized return on average tangible equity, to 11.2% from 9.7%.

The group's profit before tax for the period rose 15.8% year over year to $12.41 billion. The first-half pretax earnings included an $828 million dilution gain recognized once the merger of its associate Saudi British Bank with Alawwal Bank closed, a $615 million provision in respect of misselling payment protection insurance, and $248 million of severance costs arising from cost efficiency measures across HSBC's global businesses and functions.

Pretax profit from the group's Asian operations increased to $9.78 billion from the year-ago $9.38 billion. Its European business, meanwhile, reported a pretax loss of $520 million, compared to a pretax profit of $110 million a year earlier. The North America business booked a pretax profit of $746 million, compared to $42 million in the previous year, while pretax profits in the Middle East and North Africa and Latin America came in at $1.74 billion and $665 million, respectively, compared to the year-ago $836 million and $344 million.

Group net interest income rose to $15.24 billion from the year-ago $15.10 billion, while net fee income declined over the same period to $6.12 billion from $6.77 billion. Net income from financial instruments held for trading or managed on a fair value basis totaled $5.33 billion, compared to $4.88 billion a year ago.

HSBC's first-half reported revenue was up 7.6% year over year. Adjusted revenue climbed 8.0% year over year, mainly due to strong performances in retail banking and wealth management and commercial banking.

The bank booked changes in expected credit losses and other credit impairment charges of $1.14 billion in the half, up from the year-ago $407 million. Total operating expenses came in at $17.15 billion, compared to $17.55 billion in the year-ago period.

The lender said it now expects interest rates in the U.S. dollar bloc to fall rather than rise, and geopolitical issues could impact its major markets. Given the prevailing outlook for interest rates and revenue headwinds in global banking and markets as well as retail banking and wealth management, the lender does not expect to meet its 6% ROTE target in the U.S. by 2020.

HSBC said the nature and impact of the U.K.'s exit from the EU remain highly uncertain in the near term. However, the group said its global presence and diversified client base should help mitigate the impact of Brexit.

"Our program to manage the impact of the U.K. leaving the EU was set up in 2017 and has now been broadly completed. Our existing footprint in the EU, and in particular our subsidiary in France, has provided a strong foundation for us to build upon," the lender said.

The group declared a second interim dividend for 2019 of 10 cents per ordinary share in respect of 2019, payable Sept. 26.

As of June-end, the group's common equity Tier 1 ratio was 14.3%, compared to 14.0% as of 2018-end and 14.2% a year ago. Its leverage ratio stood at 5.4% at June-end, down from 5.5% at 2018-end but unchanged from a year ago.

HSBC also said it plans to buy back up to $1 billion of its own shares soon.