BREAKINGVIEWS-HSBC's upward march takes a temporary detour

(The author is a

Reuters Breakingviews

columnist. The opinions expressed are his own.) By

George Hay

LONDON, Feb 21 (Reuters Breakingviews) - The UK bank's shares are up by two-thirds since the summer, as investors salivate at the benefits of higher interest rates on its revenue. Yet one-off charges and other setbacks dragged it into the red in the fourth quarter.

HSBC

is on the mend, but the road is bumpy. A full view will be published shortly. On Twitter https://twitter.com/gfhay CONTEXT NEWS - HSBC on Feb. 21 reported revenue of $9 billion for the fourth quarter of 2016, 24 percent below the $11.8 billion recorded the previous year. - The UK bank said operating expenses in the quarter rose 8 percent year-on-year to $12.5 billion. The bank suffered a pre-tax loss of $3.4 billion, compared with a loss of $858 million for the same period of 2015. - For 2016 as a whole, pre-tax profit fell to $7.1 billion, from $18.9 billion in 2015. The figure was well below the $14.4 billion average expected by analysts. - HSBC's return on equity for 2016 was 0.8 percent, compared with 7.2 percent for 2015. Stripping out one-off items and the UK bank levy, it was 7.7 percent. The bank's common equity Tier 1 ratio at the end of December was 13.6 percent, up from 11.9 percent a year earlier. - HSBC took a $2.4 billion writedown in the fourth quarter against the remaining goodwill of its European private banking business, relating mainly to

Safra Republic Holdings

, the private bank which it bought in 1999. - Since December 2014 HSBC has achieved 97 percent of its target to cut $290 billion in risk-weighted assets from its balance sheet. It now expects to deliver annualised cost savings of $6 billion by end-2017, $1 billion more than the top end of its initial plan. - HSBC shares were down 6 percent at 669 pence by 0900 GMT on Feb. 21. - For previous columns by the author,

Reuters

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Peter Thal Larsen

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Sarah Hurst

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