LONDON – HSBC is expected to announce a near $23 billion annual profit on Monday, with cost-cutting and restructuring ahead of schedule as Europe's biggest bank seeks to consign its U.S. troubles to the past.
Pretax profit for 2012 is forecast at $22.7 billion, according to the average of 28 analysts polled by Reuters, up 4 percent from $21.9 billion in 2011. The range of estimates is wide, however.
HSBC's <0005.HK> Chief Executive Stuart Gulliver has sold or exited 47 businesses since taking over at the start of 2011, including the recent profitable sales of its stake in Chinese insurer Ping An and its Panama business.
Gulliver wants to cut costs and boost profitability, and has said a more streamlined structure is needed to better manage risk and compliance across a bank that spans more than 80 countries and 60 million customers.
HSBC was fined a record $1.9 billion in December for anti-money laundering lapses in the United States and Mexico which Gulliver called "shameful".
Gulliver wants to cut annual costs by $3.5 billion by the end of this year, and analysts said he looks set to exceed that and could increase the target at a strategy update in May.
The CEO says savings will be diverted to faster growing emerging markets, but improving profitability and revenues have been more challenging and he has work to do to meet his target of a return on equity of 12-15 percent and a cost/income ratio of 52 percent by the end of this year, analysts said.
Profits should be underpinned by strong performances in its commercial bank and investment bank, and in Hong Kong and the rest of Asia, while losses from bad loans should fall sharply.
But the big fine imposed by U.S. regulators and provisions to compensate customers for mis-sold products will eat into profits. HSBC could add $500 million more to its provision for payment protection insurance (PPI) in Britain, based on the trend shown by rivals.
HSBC also releases its annual report on Monday, providing disclosure on the pay of executives and its top bankers. It paid out $4.2 billion in bonuses for 2011, and is under pressure to cut or claw back payments following its U.S. troubles.
(Reporting by Steve Slater; Editing by Elaine Hardcastle)