- HBSC reported 'encouraging' first-quarter results as profits topped market expectations on higher revenues in its retail banking and wealth management arm and lower costs.

For the three months ended 31 March 2019, reported profit before tax rose 31% to $6.2bn from a year earlier. That was above expectations from UBS for pre-tax profit of $5.7bn. Revenue increased 5% to $14.4bn and operating expenses fell 12% to $8.2bn. 

Earnings per share jumped 40% to 21 cents, and return on tangible equity was up 220bps to 10.6%.

The bank's common equity tier one ratio, a key measure of its financial health, was up 30 basis points from 31 December 2018 to 14.3%.

The jump in profits was driven by higher revenue in retail banking and wealth management due to 'balance sheet growth and wider margins in Retail Banking, and in CMB due to growth in Global Liquidity and Cash Management and Credit and Lending.

The bank’s net interest margin (NIM)– the difference between interest earned on loans and money paid on deposits – slipped to 1.59% for the quarter, missing estimates from UBS estimates of 1.66%.

This slip in NIM was driven by a 32 basis points increase in the cost of funds, notably from the increased cost of customer accounts in Asia, partly offset by a 19 basis point increase in gross yields, mainly due to higher yields on surplus liquidity in most regions and rising lending yields, the company  said. 

 The bank returned to positive adjusted jaws of 6.0%, supported by favourable markets-related movements and disposal gains in Latin America.

'We have made a good start to 2019. Reported profit after tax was up significantly on 1Q18, thanks largely to strong revenue growth in our Retail Banking and Wealth Management and Commercial Banking businesses, and favourable movements in significant items. Return on tangible equity - our headline measure - was up considerably on the same period last year, and we delivered positive adjusted jaws over the quarter,' the company said.

'These are an encouraging set of results, and we remain focused on executing the strategy we outlined last June. At the same time, we remain alert to risks in the global economy. We are proactively managing costs and investment in line with this more uncertain outlook, and will continue to do so.'

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