HSBC prof­its rise in H1 on cost-cut­ting, solid mar­kets Per­for­mance pleas­ing af­ter tur­bu­lent 2016: Flint

Kuwait Times - - BUSINESS -

HSBC’s prof­its rose in the first half of the year as it slashed costs and won sup­port from fa­vor­able mar­ket con­di­tions, the bank­ing gi­ant said yes­ter­day. Net profit jumped 10 per­cent to al­most $7.0 bil­lion (7.8 bil­lion eu­ros) in the first six months of the year com­pared to the first half of 2016, the group said in an earn­ings state­ment.

Pre-tax profit for the six months rose five per­cent to $10.2 bil­lion. Out­go­ing chair­man Douglas Flint de­scribed the per­for­mance as “ex­tremely pleas­ing”-com­ing af­ter a tur­bu­lent 2016 that re­sulted in huge write­downs and re­struc­tur­ing costs for the Lon­don-head­quar­tered bank as it laid off thou­sands of staff.

The Asia-fo­cused gi­ant has been on a re­cov­ery drive over the past two years, stream­lin­ing its op­er­a­tions and ex­it­ing un­prof­itable busi­nesses. Like many global banks it has strug­gled to boost prof­its as China’s econ­omy slows and un­cer­tainty caused by Bri­tain’s loom­ing exit from the Euro­pean Union casts a shadow over the sec­tor.

In ad­di­tion, HSBC has grap­pled with stricter cap­i­tal rules, low in­ter­est rates de­spite fresh tight­en­ing-and scan­dals stem­ming from its own mis­be­hav­ior. How­ever fol­low­ing yes­ter­day’s re­sults, chief ex­ec­u­tive Stu­art Gul­liver ex­pressed con­fi­dence in the out­look de­spite strains in­clud­ing Brexit un­cer­tainty. “There is still en­gines for growth if you be­lieve in the long term story of China, Asia-Pa­cific, the ASEAN, the Mid­dle East,” he told a con­fer­ence call.

“There is still fur­ther up­side and ac­tu­ally we’re still prob­a­bly at the be­gin­ning of a (rate) tight­en­ing cy­cle,” he said. Higher in­ter­est rates are good for banks as it leads to in­creased re­turns on the in­ter­est they make from prod­ucts in­clud­ing home mort­gages and credit card pur­chases.

HSBC also ben­e­fit­ted in the first half from im­prov­ing per­for­mances on global mar­kets, in­clud­ing record-highs for indices on Wall Street.

“Mar­kets-based rev­enues ben­e­fited... com­mer­cial bank­ing cus­tomer ac­tiv­ity was ro­bust, wealth man­age­ment and in­surance rev­enues were no­tably stronger in Hong Kong, and credit ex­pe­ri­ence glob­ally re­mained re­mark­ably sound,” HSBC said in its earn­ings re­lease. “As cen­tral bank in­ter­est rates edged higher, led by the US, we be­gan to ben­e­fit from im­proved mar­gins on our core de­posit bases, pro­vid­ing a wel­come en­hance­ment to the group’s rev­enue mix,” the len­der added.

HSBC also an­nounced yes­ter­day a share buy­back of up to $2 bil­lion, ex­pected to be com­pleted in the sec­ond half of the year-help­ing its share price to rise 2.0 per­cent to 758.80 pence in Lon­don af­ter­noon deals. In Hong Kong, its shares closed up 2.62 per­cent at HK$78.45 ($10.06).

“HSBC’s earn­ings are def­i­nitely bet­ter than mar­ket ex­pec­ta­tions,” said Dickie Wong of Hong Kong-based Kingston Se­cu­ri­ties. He de­scribed the bank as be­ing in “very good shape” af­ter wide-rang­ing re­struc­tur­ing pro­grams. The half-year re­sults showed op­er­at­ing ex­penses dropped 12 per­cent to $16.4 bil­lion, partly stem­ming from a sell-off of its Brazil op­er­a­tions.

Flint said there were still un­cer­tain­ties ow­ing to in­creas­ing geopo­lit­i­cal ten­sions and “am­bigu­ous pre­dic­tions” around Bri­tain’s fu­ture re­la­tion­ship with the EU post-Brexit, but de­scribed HSBC’s per­for­mance as re­silient. In his last state­ment as chair­man be­fore step­ping down in Oc­to­ber 2017, Flint warned over the pos­si­ble reper­cus­sions of the Brexit deal.

Gul­liver added there was still a risk that HSBC may need to re­lo­cate some jobs out of Lon­don over Bri­tain’s EU de­par­ture. “Cer­tain ac­tiv­i­ties that have to be done un­der the EU law will be un­law­ful to do from the UK,” he told a con­fer­ence call.

“That’s the up to 1,000 jobs that we would move to France” to pro­tect a po­ten­tial loss of rev­enue to­talling about $1.0 bil­lion. The bank also an­nounced yes­ter­day that Bri­tish na­tional Mark Tucker, chief ex­ec­u­tive of in­surance group AIA, will re­place Flint as chair­man. It is part of a man­age­ment over­haul that will see the bank also choose a new chief ex­ec­u­tive to re­place Gul­liver, who is ex­pected to leave in 2018. — Reuters

HONG KONG: A se­cu­rity guard shows the di­rec­tion to a woman at the HSBC build­ing in Hong Kong yes­ter­day. —AP

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