HSBC Holdings, Europe's largest bank, fell the most in two months in London trading after first- quarter revenue missed analysts' estimates and costs increased at a faster pace.

Adjusted revenue gained 4 percent to $15.4 billion in the first three months of the year, HSBC said on Tuesday, missing the $15.8 billion average prediction of five analysts compiled by Bloomberg. Operating expenses rose 6 percent to $8.5 billion, driven by hiring and wage inflation.

"Structural headwinds remain," according to Ian Gordon, an analyst at Investec Plc in London with a sell rating on the stock. "We still believe that," in full-year 2015, "costs may fall slightly faster than revenues," he wrote.

Chief Executive Officer Stuart Gulliver, 56, is striving to cut costs and sell businesses to bolster earnings, while spending billions of dollars to boost internal compliance. He said the bank is still considering moving its headquarters abroad as British lawmakers pledge to raise taxes on lender's balance sheets after elections.

The shares fell 1.8 percent to 635 pence at 2:38 p.m. in London after rising as much as 1.4 percent in earlier trading. They have increased about 4.4 percent this year. Standard Chartered Plc, the London-based bank which also generates most of its earnings in Asia, has gained 10 percent.

HSBC "is expected to give wider strategic plans in June, and whilst the embedded uncertainty surrounding their jurisdiction remains, continued resistance to further share price gains should be expected," said Will Hedden of London Capital Group Holdings Plc. "Increased staff in regulatory and policing areas of the bank added to the cost base."

Pretax profit rose to $7.1 billion from $6.8 billion a year earlier, beating the $5.8 billion expectation of analysts surveyed by Bloomberg. The investment bank reported pretax profit of $3.04 billion, up from $2.9 billion, while provisions for souring loans fell 29 percent to $570 million in that period.

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"Our business recovered well in the first quarter following a difficult fourth quarter," Gulliver said in the statement. The investment bank "had its usual strong start to the year" and "loan impairment charges were significantly lower" in Europe and North America, he said.

HSBC took a $139 million provision at the global private banking division, without giving details. The lender has been embroiled in scandal over allegations its Swiss private bank helped drug cartels and arms dealers launder money, while advising customers on how to evade tax. HSBC also set aside $137 million for a British customer redress program.

Unlike Barclays Plc and Royal Bank of Scotland Group, HSBC didn't need to make further provisions to cover the cost of settling probes into the global rigging of currency markets. Barclays took a 800 million-pound ($1.2 billion) charge in the first quarter and RBS set aside 334 million pounds.

HSBC was hit the hardest by Chancellor of the Exchequer George Osborne's budget earlier this year, with tax increases costing banks 5.3 billion pounds over the next five years.

Gulliver told reporters that the latest comment regarding a possible move of headquarters "is not a threat."

"We are under significant pressure from our shareholders who don't understand the extent to which their dividend and the growth of the company is being set back by what they perceive to be is the wrong location," he said, adding that it will take "months" to review the bank's domicile.

With regulators stepping up scrutiny in the wake of the financial crisis and rising fines, British banks have been restructuring businesses and seeking ways to shore up their capital buffers. HSBC, which has assets of $2.7 trillion, is among lenders required to split consumer banking from riskier trading businesses by 2019 under fire breaks known as a ringfence.

"The U.K. has rejected the concept of universal banking," Gulliver said. "That's what the ringfence means."

HSBC said it generated $4.6 billion of capital from profit in the first three months of the year, helping it fund an interim dividend and strengthen its common equity Tier 1 capital ratio, a measure of financial strength, to 11.2 percent from 11.1 percent at the end of December. The interim dividend was 10 cents share.

HSBC's return on equity, a measure of profitability, was 11.5 percent at the end of the first quarter, down from 11.7 percent a year earlier.

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The bank will update investors on its strategy on June 9.