What happened?

HSBC, Europe’s largest bank, reported a 31% jump in pre-tax Q1 profits. Earnings per share rose by 40%. Revenue increased by 5.24% y/y to $14.428 billion. What’s the reason for this success and what is the outlook for the stock?  

Why is it important?

In general

These days, market players eye financial stocks with great attention as their performance is regarded as a barometer of the world’s financial and economic health.

For investors

HSBC cited strong growth in Asia where it makes three-quarters of its profits as one of the major factors of its success. The bank’s CEO John Flint said that given the global economic uncertainty the results were “encouraging”. According to him, the strongest businesses were retail banking and wealth management, as well as commercial banking.

It’s also evident that HSBC managed to successfully cut costs. Operating expenses diminished by 12% in the first 3 months of the year.

The biggest challenge for the bank is to improve its performance in the United States. Last quarter the situation improved as the bank’s American business returned to profit but investors still want to see a sustainable trend there.  

For traders

The stock is up by more than 7% since the start of the year. It rose above 674.00 in London (38.2% Fibo of the 2018 decline). This area together with the 50-week MA in the 666.00 area will now act as support. The next level to watch on the upside is 700 (50% Fibo, 100-week MA and the psychological level).

The weekly chart of HSBC
HSBC, weekly chart