HSBC profits climbed in 2018 despite a bruising final quarter as worries over the global economy and the US-China trade war began to bite, the banking giant said yesterday.
The London-headquartered behemoth told investors it was still aiming to meet targets despite the looming twin storms of Brexit and the long-running trade impasse between Washington and Beijing.
But analysts warned it remained vulnerable to any fallout from either issue becoming a full-blown crisis in 2019.
Overall, last year saw strong growth for HSBC with net profit ballooning 30% to $12.6bn.
Profit before tax climbed 16% to $19.9bn.
The results capped the first full year at the helm for chief executive officer John Flint, who has vowed growth while keeping a lid on costs.
But the yearly growth figures were dampened by a tough final quarter when the markets — especially those in Hong Kong and China — went into meltdown over global trade fears.
Adjusted pre tax profit fell 1% to $3.4bn in October-December, missing the $4.4bn forecast by analysts.
In a statement attached to yesterday’s earnings, the bank’s leadership said they were prepared to weather fallout from any failure of the trade talks and Britain’s impending departure from the EU.
But in its annual report, HSBC said its “expected credit loss” impairment allowance had increased by $165mn to $410mn because of “the increased level of economic uncertainty in the UK”.
HSBC had already announced that some operations were moving from London to Paris because of Britain’s EU departure next month.
“Our existing footprint in the EU, and in particular our subsidiary in France, has provided a strong foundation for us to build upon,” the bank said yesterday.
Chairman Mark Tucker yesterday said “the fundamentals for growth in Asia remain strong in spite of a softer regional economic outlook”.
“The system of global trade remains subject to political pressure, and differences between China and the US will likely continue to inform sentiment in 2019,” he said.
Tucker added that progress on trade deals between the EU, Singapore and Japan — as well a large deal among Pacific trading nations — helped cushion those jitters.
HSBC posted a healthy doubling of profits in 2017 but it faced some troubling years before that.
The bank had to lay off tens of thousands of staff as part of a wide-ranging overhaul that also saw it sell its Brazil operations in 2015 and also had to pay out huge money laundering penalties earlier in the decade.
A consumer boycott on Danone products in Morocco contributed to the French food giant’s profits and sales sinking last year, it said yesterday.
The world’s largest yoghurt maker said in a statement that its net profit fell by 4.1% to €2.35bn ($2.65bn) in 2018.
Sales dropped by 2.1% in the last three months of the year, driven by a 35% plunge in Morocco, where there has been unprecedented boycott campaign over high prices against Danone milk and two other well-known brands since April.
The boycott’s impact in 2018 “on total net sales was a decrease of -€178mn (-$201mn) versus 2017 net sales, of which around two thirds come from losses in milk sales, and one third from losses in dairy products,” the company said in a statement.
chief financial officer Cecile Cabanis said in a conference call that there was still a market share for Danone’s products in Morocco, but she did not expect to return to growth there before the end of 2019.
The boycott campaign against the high cost of living in Morocco spread like wildfire online last year, calling on Danone milk, Afriquia service stations and Sidi Ali water — the leaders in their sectors — to lower their prices.
Despite the boycott, the company said its full-year reported sales were down just 0.7%
It benefited from sales of dairy products stabilising in Europe, growing strongly in the CIS region that includes most ex-Soviet countries and also improving in Latin America.
In North America, sales in the “essential dairy and plant-based” food products division surged by 12.2% to fivebn euros.
Sales of infant formula products fell in China, but Cabanis said the decline was slowing, dropping from 20% in the third quarter to 10% in the fourth.
Anglo-Australian mining giant BHP yesterday reported a lower-than-expected US$3.73bn half-yearly profit, as it warned of a softening Chinese market and growing trade rows.
The underlying profit for the six months to December 31 was 8% lower than the US$4.05bn recorded in the previous corresponding period, missing market expectations after a series of operational problems at its mines.
“It’s a soft result,” Fat Prophets resources analyst David Lennox told AFP of the first-half result, adding that a pullback in commodity prices was also a factor.
BHP chief executive Andrew Mackenzie said a “strong second half is expected to partially offset the impacts from operational outages in the first half”.
They included production outages because of a major train derailment at its Western Australia iron ore operations, an outage at its copper mine in South Australia and a fire at a Chilean facility.
The miner said it expected global growth to be slightly softer in 2019, with further escalation in trade protectionism a “downside risk”.
BHP also expected China’s economic growth to “slow modestly” this year, with weaker exports partially offset by easier monetary and fiscal policy.
But surging iron ore prices could provide a windfall for the second-half of the financial year.
Prices have recently risen substantially thanks to a drop in supply from Vale’s Brazilian operations, which were affected by a fatal dam collapse.
The company declared an unchanged US$0.55 dividend per share for the period.
Revenues from continuing operations were up one% to US$20.7bn.
Net profit after taxation attributable to shareholders stood at US$3.76bn, a 87% jump from the prior period after the previous result was weighed down by a hefty charge from US tax reforms.
Bank of Georgia
Bank of Georgia Group Plc reported an 11.8% jump in annual profit on higher lending thanks to a growing Georgian economy, but warned that growth of unsecured consumer loans would moderate on the back of some newer rules.
The bank, one of the former Russian republic’s two main lenders, also said that it may explore the issue of additional tier one capital, normally debt instruments convertible into equity, in dollars this year.
Georgia’s economy slowed marginally in 2018 but still grew 4.8%, helping the Tbilisi-based bank, which offers retail, corporate and investment banking, and wealth management, to report 22.2% growth in its loan book to 9.40bn laris ($3.57bn).
Pretax profit rose to 437.5mn laris ($166.10mn), for the 12 months ended December 31, from 391.3mn laris ($148.56mn) a year earlier, the FTSE 250 lender said.
But the company flagged that recent regulatory changes on retail lending guidelines would see growth of Unsecured consumer loans ease.
It said it still expected solid growth in mortgages and lending to small and medium-sized enterprises (SME).
The changes included updated caps on payment-to-income and loan-to-value ratios and the introduction of Basel III capital adequacy requirements, said the bank.
It added that this would lead to banks seeing a shift towards lending to corporates, SMEs and the mortgage sector and that it now expects lending growth over the next 12 months to be closer to 15%, which is at the lower end of its 15-20% medium- to long-term target.
FTSE 250 firm’s net interest margin — a key measure of financial strength — slipped 130 basis points to 6% in the last quarter of the year as it shifts to a higher quality, finer-margin product mix due to tighter rules on unsecured consumer lending.
The bank’s main competitor TBC Bank Group is scheduled to report its results later this week.
The former Soviet republic, home to pipelines that carry oil and gas from the Caspian region to Europe, saw its economy expand by 4.8% in 2018, slowly slightly from 5% in 2017.
Israeli chip manufacturer TowerJazz said it expected its main business units to grow further this year, as it reported higher fourth-quarter profit but cautioned the sector had entered 2019 facing macro-economic headwinds.
TowerJazz, which specialises in analogue chips used in cars, medical sensors and power management, sees first-quarter revenue in a range of 5% above or below $310mn, in line with expectations.
CEO Russell Ellwanger declined to give a full-year forecast after the company recorded $1.3bn in 2018 revenue but said that its various businesses were performing well with significant contracts forged recently.
“We see core business growth throughout the year,” he told Reuters.”Overall, every one of our core businesses is a very big, stable, growth market.”
The company reported diluted earnings per share excluding one-time items of 41 cents in the fourth quarter yesterday, up from 37 cents a year earlier.
Revenue slipped to $333.6mn from $357.6mn.
Analysts had forecast adjusted EPS of 42 cents on revenue of $336.9mn, according to I/B/E/S data from Refinitiv.
Ellwanger noted that the renegotiation of a contract in the second quarter could weigh on revenUS2C although that would likely be offset by core growth.
“On an organic basis we see ourselves growing nicely and that’s a function of the wins we had in 2017 and 2018,” Ellwanger said.
Overall, the chip market has seen a pullback in the mobile sector which has not reversed so far in 2019, he said, while geopolitical concerns, partly due to US-China trade tensions, had led to uncertainties in supply.
“There is more of a closer inventory control...Nobody wants to be caught holding inventory that could become stale and obsolete,” Ellwanger added.
Austrian bank BAWAG Group lifted its 2020 profit target and proposed paying a higher dividend after its focus on retail and small businesses paid off last year with an unexpected 14% increase in pre-tax profit.
The former trade union bank, which is backed by US private equity group Cerberus Capital Management, said yesterday it aims to reach a pre-tax profit of more than €600mn ($678mn) this year, moving its 2020 forecast forward by one year.
It now sees the 2020 figure at more than €640mn.
The lender has been focusing on bolt-on takeovers and retail-partnerships in the German speaking region to drive growth.
It cooperates with wholesaler Metro Austria, electronics chain MediaMarktSaturn Austria and retailer Rewe and has bought two companies in Germany and Switzerland specialised in dental sector billing.
Retail and small businesses contributed 70% of its 2018 profit before tax, which came in at €573mn.
Analysts had expected €561mn, according to Refinitiv Eikon data.
Bawag’s fully loaded CET1 ratio, a measure of capital strength, stood at 14.5% at the end of December, up from 13.5% at the end of 2017.
However, BAWAG aims to trim that ratio to between 12 and 13% this year and next.
“We outperformed all of our targets, focused on the things we control, and delivered on our promise of being good stewards of capital all while continuing to shape the BAWAG Group of tomorrow,” chief executive Anas Abuzaakouk said in a statement.
The group said it would propose a dividend of €2.18 per share for 2018 after €0.58 per share the previous year.
The lender has a policy of paying out around half its net profit to shareholders.
BAWAG said it was actively evaluating stock buyback options to distribute remaining excess capital.
Net interest income was up 6% in 2018 at €840.5mn.
Net fee and commission income grew 30.4% to €282.8mn. BAWAG shares were indicated to open 1% higher.
Australian vitamin maker Blackmores Ltd cautioned that weak sales in China, its biggest export market, will drag on its net profit in second half of the year, driving down its shares the most since the company listed three decades ago.
The vitamin maker, which has benefited from exploding Chinese demand for Australian health products, said sales to the mainland fell more than a tenth in the six months to December, and the pattern was continuing partly due to “a general softening of consumer sentiment”.
Full-year revenue is expected to be “modest”, it warned, even as the beachside Sydney-based company turned in a record first-half net profit.
Blackmores said it was reviewing its operations in China, without elaborating.
The warning sent Blackmores shares down as much as a third, their biggest percentage drop since 1985.
The stock hit its lowest intraday level since 2015 as investors rethought the underlying value of the company’s main growth prospect.
By midsession the shares were down 23%, while the broader market was up 0.4%.
Blackmores’ dour outlook underlines the precarious position of companies around the world that have staked their future on insatiable Chinese consumer appetite. In January, computer maker Apple Inc rattled global markets as it issued a surprise revenue warning based citing weaker demand for its iPhones in China.
That is all against a backdrop of bitter trade tensions between the United States and China which have led to tougher conditions for exporters.
Blackmores reported a net profit of A$34.3mn ($24.46mn) for the six months to December 31, up 0.4% from the previous corresponding period.
Half-year revenue from ordinary activities rose about 11% to A$319.4mn, which the company said was its best-ever revenue figure for the period.
Walmart reported a jump in fourth-quarter profits yesterday behind higher sales at US stores and an increased e-commerce business.
The world’s biggest retailer, which has been adapting its US stores to the digital era by adding more in-store pickup of smartphone orders, reported profits of $3.7bn in the quarter ending January 31, up nearly 70% from the year-ago period.
The jump was accentuated because the company’s profits in the year-ago period were weighed down with $1bn in costs associated with paying off debt early. Revenues were up 1.9% at $138.8bn.
Comparable sales at US stores increased 4.2% during the quarter.
Walmart’s American namesake stores account for around two-thirds of overall sales.
The strength of this division helped offset lower sales in Walmart International and Sam’s Club, a wholesale chain. The company, often seen as a rival to Amazon in the retail big leagues now offers grocery pickup at more than 2,100 of its 4,755 US stores and delivery at nearly 800 locations.
E-commerce sales increased 43%.
“We had a good year,” said Walmart chief executive Doug McMillon.”Progress on initiatives to accelerate growth, along with a favorable economic development, helped us deliver strong comp sales and gain market share.”
Walmart’s results translated to earnings per share of $1.41, above the $1.33 expected by analysts.
Revenues also topped estimates.
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