HSBC France 2017 annual and second half results highlights
At the 20 February 2017 meeting, HSBC France’s Board of Directors reviewed the second half year results and approved the bank’s consolidated financial statements for year 2017.
HSBC France continues to deploy its strategy based on a universal banking model, with the support of the HSBC Group. HSBC France’s performance in 2017 was achieved in an environment of gradually improving economic growth both in France and abroad. However, historically low interest rates in Europe impacts the profitability of Retail Banking in France.
Year ended 2017
Consolidated profit before tax was €219m, down from €432m in 2016.
These results include:
- significant items, restated within the HSBC Group's adjusted performance framework described in appendix (€-114m in 2017 and €-231m in 2016);
- in 2016, exceptional positive items amounting to €180m, mainly to the partial discontinuation of macro-hedging relationships held by Balance Sheet Management;
- change in PVIF1 (€-3m in 2017 as opposed to €-26m in 2016);
- change in market value of trading debt in issue due to credit spread (€-86m in 2017 and €16m in 2016).
Excluding all these items, HSBC France's profit before tax went down 14% mainly on Retail banking and wealth management, linked with the lasting low interest rates environment.
The phased-in total capital ratio was 14.1% at 31 December 2017 versus 13.2% at 31 December 2016. At 31 December 2017, the phased-in CET1 ratio was 13.1% and the phased-in leverage ratio was 3.7%. The Liquidity coverage ratio (LCR), calculated according to the EU’s delegated act, was 149%.
Net operating income before LICs was €1,907m compared to €2,317m in 2016.
Fall in revenue is explained by:
- significant revenue items, restated within the HSBC Group's adjusted performance framework described in appendix (€-24m in 2017 and €67m in 2016);
- in 2016, an exceptional €122m gain relating to the partial discontinuation of macro-hedging relationships held by Balance Sheet Management and the €58m positive impact linked with the currency effect on the investment in a leasing subsidiary located outside France;
- change in PVIF (€-3m in 2017 as opposed to €-26m in 2016);
- change in market value of trading debt in issue due to credit spread (€-86m in 2017 and €16m in 2016);
- In 2017 a €82m gain on a derivative associated with an advance on a corporate customer, fully offset by a loan impairment charge.
Net interest margin down 14 per cent suffered from the impact of low interest rates which were not fully offset by an increase in deposits and loans volume. Net fee income has decreased 11 per cent compared to 2016 as there was a good momentum in GB&M.
Loan impairment charges were €81m in 2017 versus €73m in 2016. The increase was due to a loss on a receivable from a Global Banking counterparty totalling €82m, fully offset by the gain recognised on an associated hedging derivative. Excluding this specific situation, which did not affect HSBC France's P&L, there was a net release of credit risk provisions. This reflects both the improved financial situation of businesses and HSBC France’s rigorous credit risk management.
Operating expenses amounted to €1,607m in 2017, compared with €1,812m in 2016. These include significant cost items, restated within the HSBC Group's adjusted performance framework described in appendix (€-90m in 2017 and €-298m in 2016); HSBC France is continuing its programme of spending and investing for growth as part of the HSBC Group’s strategic initiatives, particularly in the digital field.
Profit attributable to shareholders of the parent company in 2017 was €177m.
The consolidated balance sheet of HSBC France showed total assets of €168bn at 31 December 2017, stable relative to the 31 December 2016 figure of €169bn.
Second half of 2017
Reported consolidated profit before tax was €23m, down from €60m in the second half of 2016.
Net operating income before LICs was €873m compared to €1,017m in the second half of 2016. Profit in the second half of 2017 is negatively impacted by a lower performance in fixed income activities caused by difficult market conditions in the fourth quarter of 2017 as well as the PVIF movement (€-32m in the second half of 2017 and €+70m in the same period of 2016). Retail banking and Commercial banking suffered from the continued low interest rates environment.
Loan impairment charges were €85m in the second half of 2017 versus €49m in 2016. The increase was due to a loss on a receivable from a Global Banking counterparty totalling €82m, fully offset by the gain recognised on a hedging derivative. Excluding this specific situation, which did not affect HSBC France's P&L, credit risk provisions fall sharply. This reflects both the improved financial situation of businesses and HSBC France’s rigorous credit risk management.
Operating expenses amounted to €765m in the second half of 2017, compared with €908m in 2016, when there was a goodwill impairment charge totalling €127m and expenses relating to the voluntary redundancy plan announced in September 2016.
1 Present value of in-force long-term insurance business (see appendix)
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