Europe's biggest bank HSBC reported a full-year pre-tax profit of $20.65 billion, much lower than a forecast of $22.7 billion, according to a Reuters poll of analysts.
The bank reported full-year net profit of $14.03 billion. Shares dropped 1 percent after earnings were released.
Stuart Gulliver, CEO of HSBC said the bank had faced a challenging operating environment in 2012 with low economic growth and changing regulations.
"Although reported pre-tax profit fell by 6 percent to $20.6 billion in 2012, underlying profit, which includes the impact of fines and penalties and U.K. customer redress provisions totaling $4.3 billion, grew by 18 percent. This was primarily due to revenue growth, notably in Global Banking and Markets and Commercial Banking, and lower loan impairment charges in North America," he said in a statement.
Bob Parker, senior advisor at Credit Suisse, told CNBC that investors would be disappointed by the return on equity number, which fell to 8.4 percent from 10.9 percent in 2011. He added that the numbers put the bank's cost-cutting measures into question.
"Where does HSBC go from here in terms of its cost-cutting program? This is very much an area of focus for investors at the minute," he told CNBC Europe's "Squawk Box."