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HSBC’s first quarter results were always going to be treated as a progress report: showing how well its restructuring was going, after its return on equity fell to less than 1 per cent and it missed a series of targets; and suggesting which way it might go when appointing a new chief executive.
And the answers would appear to be: very well, and any way it likes.
Quarterly pre-tax profit, adjusted for one-offs and currency moves, came in at $5.9bn, well ahead of consensus forecasts of $5.3bn and last year’s $5.4bn. Earnings per share of 16 cents also beat expectations of 13 cents. This improved performance was mainly due to strong trading, rising interest rates and a weaker dollar. Current chief executive Stuart Gulliver said:
This is a good set of results. The increase in adjusted profit was driven by strong performances in three of our four global businesses.
But with Mr Gulliver stepping down next year, analysts were also looking for hints as to which way the succession plan might go. Two theories had been advanced: Mark Tucker, the no-nonsense boss of Hong Kong insurer AIA who is coming in as HSBC’s chairman in October may need an insider as CEO to smooth the way; or, if the bank’s Asia business is performing well enough, an outsider without experience of the region might be considered.
News this morning of “Strong momentum in Asia with customer advances in the Pearl River Delta up 17 per cent on 1Q16, new insurance sales up 13 per cent and growth in assets under management of 15 per cent” suggests an outsider still has every chance.
Having already had the unenviable task of running Royal Bank of Scotland, RSA boss Stephen Hester has probably had his fill of tricky banking assignments. But, with his turnround of the insurance group looking increasingly complete, questions are likely to persist about his career progress.
This morning, RSA’s first quarter trading update provided further evidence that the recovery phase is over. Premium income was up 14 per cent in the period, or 4 per cent in at constant exchange rates. Underwriting strengthened again with loss ratios and expenses improving further. And the group completed of the disposal of UK legacy liabilities and a capital restructuring.
RSA’s Solvency II coverage ratio also improved to 166 per cent of the requirement, up from 158 per cent in December.
Mr Hester said:
The year has begun well for RSA. Results to date are strong with key proof points for further progress coming through positively.
For Royal Dutch Shell, progress was always going to look rapid, with the price of Brent crude almost 80 per cent higher than the 12-year lows of last year – and its quarterly numbers following BP’s announcement of a near tripling of profits.
It did not disappoint. This morning, the group reported even better-than-expected first quarter results, with earnings on a current cost of supply basis — the measure tracked most closely by analysts — more than doubling to $3.8bn. This was well above analysts’ consensus forecast for $3.05bn. Debt also fell and the company generated enough cash flow to cover its dividend – held at 47 cents per share – for a third successive quarter.
In addition, the benefits of its debt-financed BG acquisition were evident in increased oil and gas production of 3.7m barrels of oil and oil equivalent per day, up 2 per cent from the same period last year. Shell has since been shedding unwanted assets to reduce that debt, and said it was two-thirds of the way towards a target of raising $30bn from disposals by the end of 2018.
Mining group Glencore made no changes to its production guidance for 2017, but did report progress in raising earnings at its commodities trading arm. In a first quarter update, the group said it expected its marketing business to generate earnings before interest of $2.3bn to $2.6bn this year, against an earlier forecast $2.2bn to $2.5bn. This marketing operation sets Glencore apart from its peers and is closely followed by investors because of the amount of cash it generates. It ships millions of tonnes of metals, oil and other commodities around the world.
Higher agricultural commodity prices have been hitting UK supermarkets of late, but have not stopped Wm Morrison’s progress toward recovery. This morning, it said sales growth picking up again in the first quarter despite industry worries about the impact of rising inflation.
Like-for-like sales were up 3.4 per cent year-on-year, excluding fuel, although total sales rose only 2.8 per cent because of store closures.
Morrisons did acknowledge that “there was some inflation during the period” as a result of the weaker pound, but it pledged to focus on “becoming more competitive for customers” despite the cost pressures.
FT Opening Quote, with commentary by Matthew Vincent, is your early Square Mile briefing. You can sign up for the full newsletter here.