HSBC profits boosted by increase in investment banking revenue

A rebound in HSBC's investment banking operations helped Europe's biggest bank by assets to report a 4 per cent rise in first-quarter pre-tax profits even as compliance and regulatory costs continued to rise.

Higher market volatility has helped many of the world's biggest investment banks to generate a strong increase in revenues in the first quarter and HSBC's income in this area rose 8 per cent.

That helped overall revenues to rise 4 per cent, as the bank said on Tuesday that operating expenses were up 6 per cent due to "higher staff costs" in regulatory and compliance roles and higher marketing costs to "support growth".

Pre-tax profits rose to $7.06bn, up from $6.79bn for the same period a year ago. The bank continued to build its capital base, increasing its common equity tier one ratio from 11.1 per cent at the end of December to 11.2 per cent at the end of March.

"Our business recovered well in the first quarter following a difficult fourth quarter 2014," said Stuart Gulliver, chief executive. "Adjusted operating expenses increased, as expected. We continue to work on initiatives to deliver cost-savings over the remainder of 2015 and beyond."

HSBC threw down the gauntlet to the British government last month as its chairman Douglas Flint told the bank's annual meeting that its board had ordered a review of its UK headquarters in response to the regulatory reforms launched since the financial crisis.

The bank's first-quarter results come as it faces pressure on all fronts. Politicians and regulators have attacked it over the way its Swiss arm helped clients dodge tax, while investors have complained about falling profits and an underperforming share price.

In response, Mr Gulliver is preparing to announce a retreat from some of its key emerging markets, including Brazil and Turkey, as well as cutbacks in its investment bank at a strategic update to investors due on June 9.

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