HSBC Holdings Plc, Europe’s biggest bank by market
value, posted full-year earnings that missed analyst estimates after an
“unacceptable” increase in costs, and said it would reduce its profitability target.
income more than doubled to $13.2 billion in 2010 from $5.83 billion the
previous year, missing the $13.7 billion median estimate of 15 analysts.
cost-income ratio rose to 55.2 per cent from 52 per cent as rising staff costs
outpaced revenue growth, the London-based bank said in a statement today.
Stuart Gulliver, in his first earnings since
being named chief executive officer in September, cut the bank’s target for
return on equity, citing an uneven global economic recovery and regulators’
efforts to make banks hold more capital in reserve following the financial
will target a return on equity of 12 per cent to 15 per cent instead of 15 per cent
to 19 per cent, the lender said.
reduction in HSBC’s return on equity is worrying,” said Jane Coffey, head of
U.K. equities at Royal London Asset Management, which manages $51 billion
including HSBC stock.
are questioning the premium HSBC trades at if they are not going to make higher
shares trade at 1.4 times book value, while those of Barclays
Plc and Royal Bank of
Scotland Group Plc trade at a discount, which trade below their book value.
Britain’s third-biggest lender, this month reduced its RoE target to 13 per cent
or more, while Edinburgh-based RBS said it would continue to target 15 per cent.