HSBC Bank Canada profit fell nearly 9 per cent in the first quarter of 2019 despite growing revenues, as its chief executive sounded a note of caution over economic headwinds.
The dip in profit at the Canadian arm of global bank HSBC Holdings PLC was partly because of a tough comparison with the first quarter last year, when the bank recovered funds set aside for expected credit losses, and recorded gains from disposing of financial investments.
Yet the country's seventh-largest bank by assets also increased operating expenses by 3 per cent to $328-million, as it makes investments in a bid to increase its business in Canada.
“We are off to a solid start to 2019 with strong revenue growth in all three of our business lines,” said Sandra Stuart, president and chief executive officer of HSBC Bank Canada, in a statement. “We are carefully watching the headwinds we see in the economy and are mindful of maintaining cost discipline, ensuring our continuing investments are appropriately balanced with revenues.”
Profit attributable to the common shareholder was $158-million, or 32 cents a share, compared with $173-million, or 35 cents, a year ago.
HSBC Bank Canada also announced a final dividend of $180-million on its common shares for 2018, and a first interim dividend of $80-million for 2019, to be paid by June 30.
In the commercial banking division, which accounts for roughly 70 per cent of the Canadian bank's profit, operating income rose 8 per cent to $244-million, with lending balances up nearly 3 per cent.
Expected credit losses eased in the first quarter, with HSBC Bank Canada recovering $12-million that had been set aside to cover loans at risk of going bad, due mostly to an improved outlook for some customers in the energy service sector. But the recoveries were still less than that in the first quarter a year ago, when the bank recouped $28-million on accounts in the oil and gas sector.
At the parent bank, HSBC Holdings, global profit was US$4.9-billion in the first quarter, up 31 per cent from a year ago, and the bank earned 21 US cents a share, up from 15 US cents a year earlier.
HSBC’s improved profit was partly attributable to higher revenues in retail banking, wealth management and commercial banking, but also to favourable movements in what the bank calls “significant items,” which can include legal and regulatory costs.
Group chief executive John Flint called the results “encouraging,” especially given “heightened economic uncertainty globally.”
James Bradshaw