HSBA Hsbc Holdings Plc

By Margot Patrick 

LONDON -- HSBC Holdings PLC's full-year profit missed analyst expectations after the bank was hit by the high-profile collapses of two borrowers in the U.K. and South Africa.

Debt related to South African retailer Steinhoff International Holdings NV and U.K. services and construction company Carillion PLC helped push the bank's bad loan charges to $1.77 billion for the year, more than expected. Steinhoff announced in December it had found accounting irregularities and is restructuring. Carillion went bust in January.

HSBC's shares were down 4% in morning trading in London after the bank said it would put a share buyback program on hold while it raises additional debt in the first half of the year. While marketing the planned $5 billion to $7 billion in additional Tier 1 capital, listing rules prevent it from buying back shares. HSBC bought back $3 billion in shares last year and incoming CEO John Flint said Tuesday there has been "no change in our attitude" to consider buying back more shares after the debt sale is completed.

Tuesday's results are the last under Chief Executive Stuart Gulliver, who is retiring from the role after 38 years with the bank. Mr. Gulliver in an interview said his seven years as CEO produced "satisfactory" outcomes for shareholders, in a period marked by several damaging scandals for HSBC and broader shifts in banking regulation and profitability.

HSBC said its 2017 net profit surged to $9.68 billion from $1.30 billion a year earlier, in part thanks to higher revenue from Asia. Full-year revenue rose to $51.45 billion from $47.97 billion. Pretax profit of $17.17 billion was less than the $19.55 billion estimated in a poll of 20 analysts conducted by FactSet.

As CEO since 2011, Mr. Gulliver oversaw a dramatic reshaping of 153-year-old HSBC, pulling out of countries and exiting dozens of businesses to improve profits and reduce risks from financial crime.

The bank's reputation hit a low in 2012 when it agreed to pay $1.9 billion to settle allowed drug traffickers and sanctioned nations from moving money through the U.S. financial system. It pledged to overhaul its compliance systems and entered a five-year deferred-prosecution agreement with the U.S. Justice Department. The agreement expired in December without any further action required.

Mr. Gulliver previously said he would assess his success as CEO by the bank's stock price at the time of his departure and the state of HSBC's reputation, among other measures. The shares are up 17% from his start as CEO on Jan. 1, 2011, and 70% since February 2016.

On Tuesday, Mr. Gulliver said the bank has much better controls and ability now to detect and prevent financial crime, helping to safeguard its reputation. The bank has met eight of 10 targets Mr. Gulliver set out in 2015, the two laggards being U.S. profitability and revenues related to the internationalization of the Chinese yuan.

Mr. Gulliver's successor, Mr. Flint, is also a career HSBC banker, having joined in 1989 and most recently served as global head of retail and wealth management.

--Chester Yung in Hong Kong contributed to this article

Write to Margot Patrick at margot.patrick@wsj.com

(END) Dow Jones Newswires

February 20, 2018 05:32 ET (10:32 GMT)

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