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HSBC banks on Asia as FY'17 profit jumps YOY to $9.68B

HSBC Holdings Plc recorded a smaller loss in the fourth quarter of 2017 and a spike in full-year 2017 profit as the company's pivot to Asia brings in significant returns.

The bank reported a loss attributable to ordinary shareholders of the parent company of $274 million in the fourth quarter of 2017, compared to a loss of $4.44 billion in the same period in 2016. Pretax profit from Asia amounted to $3.67 billion in the period, while the pretax loss from Europe reached $2.39 billion and pretax profits in the Middle East and North Africa, North America and Latin America came in at $333 million, $521 million and $166 million, respectively.

Revenues were affected by a $139 million charge from significant items including customer redress and investments in new businesses, compared to about $2.02 billion in one-off charges in the year-ago period. The bank also booked approximately $1.14 billion in significant items added to its operating expenses, including $164 million in regulatory provisions related to its global private banking business and $64 million in other provisions connected to legal matters. One-off additions to significant expenses in the fourth quarter of 2016 reached $4.05 billion, including a $2.44 billion impairment of goodwill related to its global private banking business.

Net interest income amounted to $7.27 billion, up from $6.87 billion in the fourth quarter of 2016, while net fee income rose over the same period to $3.07 billion from $2.93 billion. Net trading income came in at $1.96 billion, compared to nearly $1.90 billion a year ago.

Loan impairment charges and other credit risk provisions widened year over year to $658 million from $468 million.

Full-year 2017 profit attributable to ordinary shareholders of the parent company came in at $9.68 billion, up from nearly $1.30 billion in 2016, when HSBC booked a loss on the sale and trading results of the Brazilian operations it sold in July that year and a $3.24 billion write off of goodwill in its global private banking business in Europe. EPS for 2017 rose to 48 cents from 7 cents in 2016, while return on equity improved to 5.9% from 0.8% over the period.

HSBC also noted that its pivot to Asia drove over 75% of its 2017 profit.

The bank's CRD IV end-point and transitional common equity Tier 1 ratios stood at 14.5% as of Dec. 31, 2017, up from 13.6% a year ago. Its leverage ratio rose over the period to 5.6% from 5.4%.

HSBC is maintaining its dividend at 51 cents per ordinary share, yielding total dividends of $10.2 billion in 2017, or a total shareholder return of 24%. The bank is planning to issue between $5 billion and $7 billion in Additional Tier 1 securities during the first half.