HSBC’s 2017 pre-tax profit jumps 142%, but lags forecast due to US tax impact

The bank’s year-ago profit figure reflected a $3.2 billion impairment of goodwill in HSBC’s global private banking business in Europe and the impact of its sale of operations in Brazil. (Reuters)
Updated 20 February 2018
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HSBC’s 2017 pre-tax profit jumps 142%, but lags forecast due to US tax impact

HONG KONG: HSBC Holdings’ 2017 pre-tax profit rose 142 percent as the lender avoided the multi-billion dollar restructuring costs that marred its 2016 results but the profit growth lagged expectations as it took a writedown following US tax changes.
Europe’s biggest bank by market capitalization reported on Tuesday a profit before tax for 2017 of $17.2 billion, compared with $7.1 billion the year before and below the average estimate of $19.7 billion, according to Thomson Reuters data based on forecasts from 17 analysts.
Those estimates did not all take into account the tax writedown, triggered by cuts in the US corporate tax rate which meant banks had to book losses on deferred tax assets they built up during loss-making times.
HSBC said in its earnings statement that its 2017 financial results include a charge of $1.3 billion relating to the “remeasurement of US deferred tax balances” to reflect the reduction in the US federal tax rate to 21 percent from 2018.
The bank’s year-ago profit figure reflected a $3.2 billion impairment of goodwill in HSBC’s global private banking business in Europe and the impact of its sale of operations in Brazil.
HSBC’s reported revenues rose to $51.4 billion from $48 billion a year ago.


BMW plans massive cost cuts to keep profits from sputtering

Updated 39 min 3 sec ago
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BMW plans massive cost cuts to keep profits from sputtering

  • ‘Our business model must remain a profitable one in the digital era,’ chief executive Harald Krueger said
  • Total number of employees is set to remain flat at around 135,000 worldwide

MUNICH: German high-end carmaker BMW warned Wednesday it expects pre-tax profits “well below” 2018 levels this year as it announced a massive cost-cutting scheme aimed at saving $13.6 billion (€12 billion) in total by 2022.
A spokesman said that “well below” could indicate a tumble of more than 10 percent.
The Munich-based group’s 2019 result will be burdened with massive investments needed for the transition to electric cars, exchange rate headwinds and rising raw materials prices, it said in a statement.
Meanwhile it must pump more cash into measures to meet strict European carbon dioxide (CO2) emissions limits set to bite from next year.
And a one-off windfall in 2018’s results will create a negative comparison, even though pre-tax profits already fell 8.1 percent last year.
Bosses expect a “slight increase” in sales of BMW and Mini cars, with a slightly fatter operating margin that will nevertheless fall short of their 8.0-percent target.
“We will continue to implement forcefully the necessary measures for growth, continuing performance increases and efficiency,” finance director Nicolas Peter said at the group’s annual press conference.
BMW aims to achieve €12 billion of savings in the coming years through “efficiency improvements” including reducing the complexity of its range.
“Our business model must remain a profitable one in the digital era,” chief executive Harald Krueger said.
This year, most new recruits at the group will be IT specialists, while the total number of employees is set to remain flat at around 135,000 worldwide.
Departures from the sizeable fraction of the workforce born during the post-World War II baby boom and now reaching retirement age “will allow us to adapt the business even more to future topics,” BMW said.
All the firm’s forecasts are based on London and Brussels reaching a deal for an orderly Brexit and the United States foregoing new import taxes on European cars.
“Developments in tariffs” remain “a significant factor of uncertainty” in looking to the future, finance chief Peter said, adding that “the preparations for the UK’s exit from the EU will weigh on 2019’s results as well.”
In annual results released ahead of schedule last Friday, BMW blamed trade headwinds and new EU emissions tests for net profits tumbling 16.9 percent in 2018, to €7.2 billion.