HSBC, Hang Seng Bank profits lower than hoped

By Staff and wire reports

HONG KONG, China -- HSBC and its Hong Kong unit Hang Seng Bank reported higher net profits for 2000, while sounding a tough outlook for 2001.

HSBC shares fells nearly 5 percent when the bank reported a pre-tax profit of $9.775 billion for 2000 after amortizing the goodwill on two acquisitions -- not quite meeting analyst estimates of $10.45 billion.

The London-listed group's 62 percent subsidiary Hang Seng Bank reported a 20.5 percent increase in net earnings to $1.3 billion (HK$10.014 billion), also just below analyst forecasts.

A cautious note

HSBC Chairman John Bond sounded a cautious note about prospects given the U.S. slowdown and its impact on other markets.

"It is clear that the rate of growth in the U.S., the principal motor for recent world economic growth, has slowed rapidly," he said in a statement.

"This will have an effect on other economies, particularly those which depend on exports to the U.S."

"Competition in the U.K. shows no sign of abating and structural changes here and in Hong Kong, where interest rate deregulation will be completed in July, suggest a testing environment ahead," Bond added.

Last year, Europe and Hong Kong recorded the strongest growth in profits with increases of 39 and 36 percent respectively and Bond said the bank wanted to maintain a broadly equal balance of earnings between the OECD and emerging markets.

The bad debt charge was $932 million, 55 percent lower than in 1999 after releasing 60 percent of the special general provision for Asian risk raised in 1997. But the bank said the balance had been transferred to boost the general provision.

Cost income ratio worsened to 55.3 percent compared with 53.9 in 1999 after costs related to the restructuring of acquisitions.

Smooth integration

The bank, which combined forces with Merrill Lynch last year in a joint venture for online broking and banking service for the mass-affluent, said the integration for the former Republic New York and Safra businesses went smoothly in 2000 and there was negligible customer attrition.

The integration of both businesses would be completed this year.

HSBC earnings per share were up 17 percent at 76 cents after goodwill amortization and the bank proposed a total dividend of 435 cents per share.

HSBC shares fell nearly five percent to 979p in London after group pre-tax profits came in lower than expected.

Shares of Hang Seng Bank closed 1.46 percent lower on Monday at HK$101.50, ahead of the results announcement.

Reuters contributed to this report.

HSBC Group
Hang Seng Bank Limited

Note: Pages will open in a new browser window

External sites are not endorsed by CNN Interactive.