HSBC Q1 net profit more than doubles to $6.35bn
Asia-focused bank HSBC said yesterday that first-quarter net profits more than doubled to $6.35bn (€4.86bn), aided by sliding bad debts, deep cost cutting and a solid performance in Britain and Hong Kong.
Earnings after taxation surged 146% in the three months to the end of March, from $2.58bn in the same part of 2012, the lender said in a results statement.
HSBC added it has now slashed a total of $4.0bn from its annual costs, axing about 46,000 jobs since 2011 as part of a massive restructuring.
Underlying pre-tax profits, after stripping out exceptional items, soared 34% to $7.6bn in the first quarter. Revenues rose 5% to $17.6bn.
“We have had a good start to the year, with growth in reported and underlying profit before tax,” said chief executive Stuart Gulliver.
“While continuing uncertainty in the global economy has created a relatively muted environment for revenue growth, we have increased revenue in key areas including residential mortgages and commercial banking in both our home markets of Hong Kong and the UK, and in our financing and equity capital markets business.
“Loan impairment charges were lower in every region, notably in North America,” he said, adding that the group was also lifted by its “continued focus on cost management”.
Bad debts — consumer loans that have turned sour — sank 44% to $1.17bn in the reporting period. That compared with $2.09bn last time around.
Gulliver added that cost cutting would continue to be a major focus for the bank, which has sold or closed down more than 50 of its businesses since 2011, including retail networks in Colombia, Russia and Thailand.
Last year, HSBC had posted a 16.5% slump in net profits as it was hit by US money-laundering fines, mis-selling scandals, rising taxation and a vast accounting charge.
Discovery
Discovery Communications posted higher revenue and profit in the first quarter as its cable television networks grabbed better US and international ratings, and forecast annual revenue above estimates.
The owner of the Discovery Channel and Animal Planet cable networks said yesterday that revenue rose 6.5% to $1.156bn. Analysts expected $1.51bn, according to Thomson Reuters I/B/E/S.
Net income increased to $231mn, or 63¢ per share, from $221mn, or 57¢ per share, a year ago. It missed Wall Street estimates by a penny.
Advertising revenue at its US networks rose 8.2% to $356mn. Its US distribution revenue fell 8.6% to $308mn.
International networks revenue increased 17% to $444mn as it boosted both advertising and distribution sales. The company said it increased subscribers in Latin America.
The company expects revenue this year to be in the range of $5.575bn to $5.70bn, which would be higher than the $5.458bn that analysts expect, on average.
Alstom
Power and transport engineer Alstom cut its sales forecast for the next three years yesterday, as some of its customers delay projects due to weak economies.
In January, Alstom said it expected a gradual improvement in its operating margin to around 8% by March 2015.
Alstom’s free cash flow turned positive after two years of outflows, reaching €408mn ($533mn) in the 2012-2013 financial year.
“Cash generation remains a top priority and we continue to anticipate a positive free cash flow,” chief executive Patrick Kron said.
Net profit rose 10% to €802mn, missing a Thomson Reuters I/B/E/S average analyst estimate of 892mn.
“Although the cash flow dynamics have started to improve, the reduced guidance is disappointing,” Societe Generale analysts wrote in a note to clients.
The company is paying a dividend of €0.84 a share, up 5% from the previous year.
Alstom, which makes commuter and high-speed trains, wind turbines and turbines for power stations, generates about a quarter of its revenue in the recession-hit eurozone, with slightly less coming from growth markets in Asia-Pacific.
“Our short-term performance is expected to be impacted by lower volumes than anticipated due to a more challenging environment,” Kron said in a statement.
Sales rose 2% to €20.27bn ($26.5bn) in the year ended March 31, missing the company’s 5% target, due to lower revenue from large hydroelectric contracts in Latin America and customer delays for some electricity transmission projects.
Alstom, which reported a 10% rise in orders to €23.8bn in its 2012/13 financial year, said it faces aggressive pricing from competitors, without elaborating. Big rivals also include US-based General Electric.
Alstom cut its organic sales growth target to “low single-digits” in the current and next two financial years until March 2016. In January it had forecast growth of more than 5% in 2012/13 and in the next two years.
Acer
Taiwan’s leading personal computer maker Acer said yesterday it swung to profit in the first quarter of 2013 thanks to income from foreign exchange and stock sales.
Acer reported net profit of T$515mn ($17.2mn) in the three months to March, up 55.6% year-on-year due to a number of non-operating incomes including foreign exchange and stock disposal gains.
This compared with a net loss of T$3.37bn in the fourth quarter of 2012 after a write-down of the value of its brands, including Gateway and Packard Bell.
First-quarter consolidated revenue was T$91.97bn, down 18.6% from last year and also down 9.4% quarter-on-quarter due to seasonal factors, the company said.
Acer, which has been struggling to branch into the tablet computer sector, was forced to cut hundreds of jobs in 2011 after suffering heavy losses due to weakening demand in Europe and the US.
Prudential
Insurer Prudential has reaffirmed a commitment to its British home market as a source of financial strength and profit even as Asian units romped ahead as the main driver of sales.
Speaking yesterday after posting 8% first quarter sales growth largely fuelled by Asia, chief executive Tidjane Thiam called the Pru’s commitment to the UK “real and for the long term.”
The rising importance of its Asian business has fuelled speculation that Prudential could change its domicile to Hong Kong to escape tough new European capital standards.
Thiam said the firm’s ongoing presence in the UK, where it was founded 165 years ago, provided an “anchor” to its A+ credit rating — crucial to the credibility of insurers.
Prudential has avoided much of the economic turbulence afflicting Europe on account of a strong focus on fast-growing Asia, the source of nearly half its sales.
Total sales in the first three months of 2013 were £1.038bn, of which £495mn came from Asia, £358mn from the US and £185mn from the UK.
Overall performance was ahead of consensus. New business profit for the group’s insurance business rose 5% from a year earlier to £563mn against £555mn predicted by analysts.
Commerzbank
Commerzbank, Germany’s No 2 lender, will have to work hard to entice investors to its €2.5bn ($3.3bn) share call this month after painting a bleak outlook for the rest of this year.
Chief financial officer Stephan Engels said 2013 would be a year of transition for the bank, which posted a net loss of €94mn in the first three months as it booked a €493mn restructuring charge linked to 4-6,000 job cuts.
“Revenues will stay under pressure, costs are expected to increase,” Engels said yesterday, adding the bank hoped to see positive effects from its revamp next year.
A source with knowledge of the bank’s capital increase said Commerzbank may therefore have to offer new shares at a hefty discount of about 50%. The source also said Commerzbank could knock at least 35% off the theoretical ex-rights price of the new shares, implying that these may be sold at around €5.50 apiece.
“Commerzbank will need a lot of persuasive power to enthuse investors to buy the new Commerzbank shares,” said Felix Scherhaufer from LBBW Asset Management.
Investors criticised the bleak outlook.
“The better first quarter results so far give no hint of a fundamentally better business development in 2013,” said Lutz Wockel from fund manager NordLB Capital Management.
Commerzbank’s Engels said he expected the bank’s interest income to decrease in 2013 as the low interest rate environment makes it increasingly difficult to make money. Costs are set to rise by up to 100mn euros each quarter due to investments, including for a revamp of its retail business.
The lender will also set aside “slightly more” money for bad loans, Engels said. Last year, Commerzbank — whose cash cow Mittelstandsbank unit specialises in providing loans to Germany’s important medium-sized companies — benefited from extremely low provisions as Germany’s economy powered ahead most of the year.
Commerzbank did not provide a more specific earnings forecast.
Commerzbank intends to use the proceeds from the capital increase to repay some of the state aid it received in the financial crisis and to strengthen its capital buffers to comply with stricter bank rules.
The transaction will increase Commerzbank’s capital ratio under the most stringent application of Basel 3 rules by around 1 percentage point, Engels said. He added that the bank is targeting a 9% capital ratio by the end of 2014.
In the first quarter, the ratio stood at 7.5%.
Since a 2008 bail-out in the wake of the financial crisis, the German government owns 25% of Commerzbank, but its holding will be diluted to roughly 18% as it will not participate in the capital increase.
Allianz
German insurance giant Allianz said yesterday it was holding to its full-year targets even though profits rose in the first three months.
“We are well on our way toward achieving our operating profit outlook for the entire year,” said chief executive Michael Diekmann in a short statement.
“Despite the good results in the first quarter, in view of the existing market risks, the management board sees no need for an adjustment of our outlook for fiscal year 2013,” he said.
In the first three months, Allianz’s total revenues rose by 6.6% to “around €32bn ($41.8bn)”.
Underlying or operating profit increased by 20% to about €2.8bn.
Net income rose by 24% to about €1.7bn.
“The improvement in our results comes from all of our business segments, so it is broad-based. Thus, the start into this fiscal year can be described as truly successful,” Diekmann said.
Societe Generale
French bank Societe Generale reported yesterday that first-quarter net profit fell by half to €364mn ($476mn) and said it would save €900mn by 2015 with the loss of more than 1,000 jobs worldwide.
The cost cuts are in addition to cuts of €550mn effected last year.
General manager Jean-Francois Sammarcelli, when asked on French BFM Business radio if the bank expected to shed more than 1,000 jobs, replied that the figure would be substantially higher.
He said that the cuts would include the loss of about 550 jobs at the bank’s headquarters in Paris.
The bank employed about 154,000 people throughout the world of whom 60,000 were employed in France, he said.
The price of shares in the banking group rose by 4.0% in initial trading, with analysts welcoming the cost-cutting strategy.
In the first three months of the year, net profit fell by half from the equivalent figure last year, owing to exceptional cost factors totalling €488mn.
And the outcome fell short of the net result broadly expected by analysts polled by Dow Jones Newswires who had foreseen about €370mn.
However, net banking income, a key measure of performance by a bank regarding the margin between the cost of taking in deposits and the price of lending them out, fell by 19.4% to €5.1bn. This exceeded the expectations of analysts who had forecast €4.94bn.
The bank said in a statement that it had decided to apply a programme to improve efficiency with three objectives: “Reduce costs and strengthen competitiveness, simplify the way the group functions and to strengthen synergy between the resources used by the different activities of the bank.”
The full effect of the programme would be achieved at the end of 2015 when total savings of €1.45bn would have been made compared with figures at the beginning of 2012, the statement said.
This programme would involve restructuring and investment costs of €600mn.
This would enable the bank to achieve a return on capital employed of 10.0%, chief executive Frederic Oudea said.
Credit Agricole
French bank Credit Agricole raised net profit by more than half in the first quarter, it said yesterday, noting that it had cleaned up its balance sheet at the end of last year.
In the first three months of the year, the bank, which is the quoted arm of the Credit Agricole holding group, raised net profit by 50.7% to €469mn ($613.5mn).
The results of the bank had been hit hard for several quarters by exceptional charges and particularly by the costs of withdrawing from its investment in Emporiki bank in Greece.
Chief executive Jean-Paul Chifflet remarked during a telephone press conference that the results reflected the decisions taken in 2012, and the absence of exceptional items apart from usual charges under auditing rules.
Excluding such charges, net profit was €726mn, an increase of 122.0% from the figure 12 months ago.
Net profit of the parent holding group, which is also responsible for regional savings banks in the wide-reaching Credit Agricole network, rose by 18.7% to €1.03bn.
The group said that the ratio of shareholder funds to loans made was 9.6% at the end of March, under the rules of the Basel III standards which take full effect at the beginning of 2019.
The bank said its target was to achieve a ratio of 10.0% by the end of 2013.
But net banking income, a key measure of a bank’s performance relating to the cost of taking in deposits and the price of lending them out, fell by 26.2% to €3.85bn.
However, this reflected a boost to the figure 12 months ago when the bank made an exceptional profit of €864mn.
Adecco
Adecco, the world’s largest staffing company, said revenues started to stabilise towards the end of the first quarter, falling an underlying 4% in March with a similar trend observed in April.
In Adecco’s biggest market, France, where revenues fell 17%, the group said it was starting to close recent underperformance to the rest of the market, although conditions remained challenging.
Adecco, which also competes with US-based ManpowerGroup, said first-quarter net profit fell to €67mn, undershooting the average poll forecast of €80.1mn.
It reiterated a target for an earnings before income tax and amortisation (EBITA) margin of 5.5% by 2015. In the first quarter, the EBITA margin fell 80 basis points to 3.0%.
Adecco shares, which trade at 13.7 times forecast earnings for the next 12 months, similar to Randstad’s 13.8, were up 0.1% at 50.75 Swiss francs in early trade.
Adecco said there were signs austerity-ravaged markets in southern Europe were starting to stabilise as big drops in wages make workers there more competitive.
The eurozone’s debt crisis has paralysed job markets, sending unemployment in the single-currency bloc to a new record of 12.1% in March, meaning more than 19mn eurozone citizens are out of work.
Recent economic data offer little hope for a quick recovery. However staffing firms — which act as a bellwether for wider labour markets because companies typically hire temporary workers at the start of a recovery and let them go when a downturn looms — are offering a ray of hope.