HSBC first quarter pre-tax profits dropped 14% to £4.2 billion

HSBC reported pre-tax profits of $6.1 billion (£4.2 billion) in the first quarter of 2016, down 14% on tough market conditions at the beginning of the year.

Excluding the effects of significant items and currency translation, profit before tax was down by $1.2 billion or 18% from the first quarter of 2015.

The company attributed the decline in profits to “reduced client activity” amid plunging oil prices and fears over the momentum of China’s economy.

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Revenue dropped 4% to $13.9 billion compared to the year-ago period, with adjusted basis net profits down 18% at £2.9 billion.

Chief executive Stuart Gulliver said: “Our first quarter performance was resilient in tough market conditions that affected the entire banking sector.

“Profits were down against a very strong first quarter of 2015, but we increased market share in many of the product areas that are critical to our strategy.

“Market uncertainty led to extreme levels of volatility in January and February, which affected our ability to generate revenue in our Markets and Wealth Management businesses.

“However, our diversified, universal-banking business model helped to cushion the impact through growth in other parts of the bank.

“Commercial Banking continued its momentum in spite of the slow-down in global trade, and we increased market share across our strategic trade corridors.

“We also grew revenue elsewhere in Retail Banking and Wealth Management, particularly from current and savings accounts in Hong Kong and the UK, and personal lending in Asia and Mexico.”

The effective tax rate for the quarter increased from 19.4% in the same period a year ago up to 25.7%, “principally due to the 8% surcharge on UK banking profits”. The tax rate increase and drop in earnings was partly offset by the bank’s cost-cutting efforts.

Total assets grew by $186.0 billion driven by increases in derivative and trading assets. Total customer lending fell by $4.3 billion.