HSBC 2011 Profit Rises to $16.8 Billion on Debt Gains

(Corrects list of sold assets in last paragraph of story published yesterday.)

HSBC Holdings Plc (HSBA), Europe’s largest bank by market value, said full-year profit rose by 27 percent, meeting analyst estimates, boosted by an accounting gain on the revaluation of its own debt.

Net income rose to $16.8 billion in 2011 from $13.2 billion in the year-earlier period, the London-based lender said in a statement today. That compared with the $16.5 billion median estimate of 24 analysts surveyed by Bloomberg. The bank had a $4.16 billion gain on the value of its own debt.

“A substantial amount has been achieved during 2011, but this will be a long journey with significant headwinds, so we are increasing the intensity of execution in 2012,” Chief Executive Officer Stuart Gulliver, 52, said in the statement.

HSBC is cutting costs and withdrawing from less profitable markets after setting aside more than $65 billion for souring loans in North America. The bank in August said it would eliminate 30,000 jobs to cut $3.5 billion of costs over the next two years, as investment banking revenue shrinks.

Costs as a proportion of revenue climbed to 57.5 percent from 55.2 percent, the lender said today. That’s more than the 48 percent to 52 percent target range set by HSBC. Return on equity, a measure of profitability, rose to 10.9 percent from 9.5 percent last year, still short of the lender’s target range of 12 percent to 15 percent.

Investment Banking Profit

The shares were unchanged at 574.9 pence as of 8:29 a.m. in London trading. Before today, the stock had declined 19 percent over the past 12 months. The Bloomberg Europe Banks and Financial Services index has declined 28 percent in the period.

Profit at HSBC’s investment banking division, led by Samir Assaf, fell 24 percent to $7 billion. That compares with a 32 percent drop to 2.97 billion pounds at Barclays Plc’s securities unit in the same period.

Pretax profit from commercial banking rose 31 percent to $7.9 billion, while income from retail banking and wealth management advanced 11 percent to $4.3 billion, HSBC said.

The lender, which gains most of its profit from Asia, has announced $4.89 billion of asset sales since May, according to data compiled by Bloomberg. HSBC has sold units in Japan and Thailand. In January, it agreed to sell operations in Costa Rica, El Salvador and Honduras to Colombia’s Banco Davivienda SA for $801 million to focus on bigger markets in Latin America.

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net. Gavin Finch in London at gfinch@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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