HSBC reported its Q1 2022 results with net profits down 32% YoY to $3.4bn. The banking major said that the profit decline was in part due to an expected credit loss (ECL) charge of $600mn vs. a $400mn release during the same period last year, primarily due to the Russia-Ukraine war and inflationary pressures. Reported revenues were down 4% to $12.5bn. Besides, the bank took a $160mn provision against China commercial real estate during the quarter. Operating income in its wealth business fell 19% to $1.9bn, primarily due to an “adverse movement” of $300mn in “market impacts in life insurance manufacturing”. Revenues at the investment bank fell 4% YoY to $4bn, and at its global debt markets unit slid 46% on weaker markets and subdued client activity. FX revenues on the other hand grew 15% to $1.1bn due to increased market volatility. On the positive side, net interest margin (NIM) increased by 5bp YoY to 1.26%. The bank’s CET1 ratio dropped 170bp QoQ to 14.1% due to a $11.2bn reduction in CET1 capital and a $24bn increase in risk-weighted assets (RWAs). This was due to an 80bp impact from regulatory changes that effected in Q1 and a 40bp impact from a $3.1bn “valuation loss in equity from financial instruments as yield curves steepened”, HSBC noted. Due to the CET1 drop, the bank said that more share buybacks were unlikely this year. Reuters adds that HSBC’s capital will be further hit in H2 2022 when it books a loss of around $2.7bn due to the sale of its retail operations in France.

HSBC’s 6.375% Perp was down 0.6 points to 101.5, yielding 5.81%.

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