Asia-focused banking giant HSBC said today that net profits surged 58% to more than $4.15 billion in the first quarter on lower taxes and bad debt charges.
However, Europe's biggest bank added that the group's pre-tax gains were pushed down by rises in other exceptional costs, including money set aside to compensate customers in Britain who were mis-sold payment protection insurance.
Europe's biggest bank said that profit after tax for the three months to March 31 rocketed to $4.153 billion (€2.88 billion) from $2.631 billion in the first quarter of 2010. Adjusted pre-tax profit fell to $5.5 billion from $6.01 billion.
'Underlying profits held up well against a strong first quarter (in) 2010,' HSBC's new chief executive Stuart Gulliver said in an earnings statement published by the London-headquartered bank.
'We were profitable in all regions and customer groups, profits increased in each of our faster-growing regions and credit quality improved. There was double-digit revenue growth in many of our businesses in the faster-growing regions. We continued to increase customer lending in all regions, except North America, with strong growth in Asia and Latin America,' Gulliver said.
HSBC said that provisions set aside for bad loans dropped 37% to $2.4 billion in the quarter. However its cost-income ratio, or costs relative to income, rose to 60.9%, well above the group's target.
The rise reflected $440m set aside to compensate clients mis-sold payment protection insurance (PPI), as well as changes in the value of HSBC's debt. The bank, which today said costs would have been flat without the exceptional charges, wants to reduce the ratio to 52% or less within two years.
HSBC publishes a key strategy review on Wednesday and analysts have said that Gulliver, who took over the helm of Europe's biggest bank in January, could use the event to announce major cost-cutting measures.
There have also been persistent reports in the British media that the lender has been looking at the possibility of switching its headquarters to Hong Kong from London to reduce the group's tax burden.
Although its headquarters are in London, HSBC was founded in Hong Kong and Shanghai in 1865 and the bank currently sees Asia as its most important region.
Gulliver, HSBC's former head of investment banking whose hiring was announced last September, replaced Michael Geoghegan who stepped down after he reportedly lost a boardroom battle for the chairman's job.
