London, UK - March 5, 2013 (www.investorideas.com newswire) HSBC shares are rebounding Tuesday, a day after sliding on the back of full year earnings which fell short of expectations with pre-tax profit down 6% from the previous year but the bank has pledged to increase its divided on strong growth in Asian markets. Looking past the numbers though, HSBC like fellow UK peers is attempting to turn a page in its story after being embroiled last year in a number of scandals.
The results include around $5.2billion of write-downs on debt and around $1.9billion to settle US claims of money laundering in the Middle East – the largest penalty ever paid by a bank and deals with Mexican drug lords. The bank has also set around $1.4 billion to compensate customers who were mis-sold PPI, another blow to the bank's reputation.
As a result of these penalties, HSBC's CEO Stuart Gulliver's bonus payment will be deferred and could be clawed back. His total pay package this year is worth around £7.4million, compared to £8million last year. Some believe he shouldn't received his bonus which is just under £2million, but the bank's earnings growth looks intact as 90% of its earnings are made outside of the UK.
With these penalties now settled and out of the way, a major overhang on the stock price has been removed for now with traders likely to focus on HSBC's ongoing cost cutting programme and ongoing disposal programme. The bank like its UK peers is attempting to deleverage itself in the wake of the recent scandals that have hit the City and investors are likely to take some comfort in this attempt to rebuild trust.
But HSBC's story is one that investors have always expressed their excitement over – although the bank fell short of expectations on the headlines, the group is clearly looking to build revenues once again now that a chunk of businesses have been disposed. This tied with the fact that its Asian and emerging market operations continue to outpace the rest of the world suggest this bank is on the path to double-digit growth in the years ahead.
The stock rose a staggering 28% last year on these reasons alone, discounting the news of the scandal. Now the negative news is out of the way, a similar if not stronger stock performance is likely in 2013 with HSBC once again cementing its place as one of the giants of the UK banking sector.
This article is provided by Ishaq Siddiqi, market strategist at ETX Capital. You can start forex spread betting today with ETX Capital, as well as placing positions on equities and indices.
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