According to Lead Capital Partners, HSBC Holdings plc, Europe’s biggest bank by capitalization, surprised investors by revealing it made an $858 million loss in the 4th quarter of 2015 compared with a $1.4 billion profit in the same period in 2014.

A sharp fall in revenues, a surge in write-downs of non-performing loans made to the oil & gas industry as well as falling income from lending were blamed for the poor results. The bank said that the outlook remained challenged because of slowing growth in China where it is very active.

HSBC announced a raft of cost-cutting measures last year aimed at saving $5 billion in operating costs by the end of 2017. 25,000 jobs were to be cut and the bank planned to exit countries in which its operations were unprofitable.

“The impact of the slowdown in Asia in general and China in particular was less of a surprise than the scale of the write-downs of bad debts linked to oil & gas,” said Lead Capital Partners’ Asian markets strategist, Solomon Greenhaus.

Though half of HSBC’s loan book is exposed to state-owned companies, there is a clear exposure to private sector companies many of whom are high cost producers that need oil prices far in excess of current values in order to be profitable.

“Despite the Q4 loss, we anticipate much better performance from HSBC in 2016. The bank’s plan to cut costs by $5 billion by 2017 is ambitious but we think they’re achievable. Lead Capital Partners maintained its hold rating on the stock.

About Lead Capital Partners:
Lead Capital Partners is an independent investment management practice founded on the philosophy that an active, opportunistic and adaptable approach to investing provides our clients with the best chance for the realization of long-term positive returns irrespective of prevailing market environments.
It is our firm belief that the “buy and hold” investment strategy that has traditionally served investors to such great effect over the decades can, now, lead to significant losses in bear markets, or to little or no profit in markets that persist in trading in ranges unless they are actively managed by seasoned professionals such as those at Lead Capital Partners.