HSBC underlying pre-tax profits fall 18% to £3.7 billion

HSBC has posted a sharp drop in profits for the first three months of the year after it was hit by "extreme levels of volatility" in financial markets in January and February.

The banking giant reported an 18% fall in underlying pre-tax profits to 5.43 billion US dollars (£3.7 billion) for the first quarter.

On a bottom-line basis, profits fell 14% to 6.11 billion US dollars (£4.2 billion).

But the bank said it was a "resilient" performance in difficult market conditions, with the entire investment banking sector suffering after stock markets tumbled at the start of 2016 amid an oil price rout.

Shares in HSBC rose in Hong Kong trading as the profits fall was not as bad as most analysts had expected.

Group chief executive Stuart Gulliver said: "Market uncertainty led to extreme levels of volatility in January and February, which affected our ability to generate revenue in our markets and wealth management businesses.

"However, our diversified, universal-banking business model helped to cushion the impact through growth in other parts of the bank."

The stock market woes left HSBC nursing a 28% plunge in underlying profits in its global banking and markets division, to 2 billion US dollars (£1.4 billion) after revenues dropped by 12%.

Earnings were also down by more than a quarter in its retail banking and wealth management arm - off 26% to 1.36 billion US dollars (£923 million).

It is the latest group to reveal the impact of recent market turmoil, with a trading update also out from Swiss bank UBS showing profits tumbled by almost 40% to 1.37 billion Swiss francs (£977 million) in the first quarter.

Earlier this month, Barclays revealed that profits dropped by a quarter in the first three months of the year to £793 million after it was hit by challenging trading in its investment banking arm.

But HSBC said tough actions were helping trim costs compared with the end of 2015.

The bank announced plans last year to cut 50,000 jobs globally by the end of 2017 in a bid to save five billion US dollars (£3.3 billion).

These measures are part of an overall strategy presented in a June update when the bank promised to axe jobs over the next two years by closing retail branches, shrinking its investment bank and selling its Brazilian and Turkish operations as it shifts resources to what it views as more promising Asian markets.

First-quarter results showed its workforce has shrunk by nearly 1,000 since the end of 2015 alone to 254,212 as it slashed roles in its global businesses, although this was partly offset by moves to hire another 536 in compliance and 1,357 in other key roles.

HSBC said in February that annual pre-tax profits rose 1% to 18.9 billion US dollars (£13.2 billion) in 2015.

The bank - which gets a large slice of its profits from Asia - blamed ''seismic shifts'' in the global economy, triggered by a sharp drop in oil prices, slowing economic growth in China and low interest rates in developed economies.

Amid a busy period for the bank, chairman Douglas Flint also announced in March that the hunt had begun for his successor, who will also take charge of finding a new chief executive to replace Mr Gulliver.