HSBC posts small rise in first half profits
Rising expenses, US settlement weigh on banking group
HONG KONG: HSBC Holdings Plc posted a small increase in first half pretax profit, as rising expenses from investments in a new growth strategy and a US$765mil provision against sale of US mortgage securities ate into higher revenues.
Europe’s biggest bank, which is shifting into growth mode after years of shrinking its global empire and restructuring the business, reported yesterday a pretax profit of US$10.7bil in the six months through June, up 4.6% from the year-ago period.
As the bank spent on hiring more frontline staff and expanding digital capabilities, its costs climbed 6% to US$17.5bil.
“We are taking firm steps to deliver the strategy we outlined in June. We are investing to win new customers, increase our market share, and lay the foundations for consistent growth in profits and returns,” John Flint, HSBC’s group chief executive, said in a statement.
Flint set out in June a three-year plan to invest US$15bil-US$17 bil in areas such as technology and in China.
HSBC’s retail banking and wealth management, and commercial banking divisions performed most strongly in the first half, Flint said, adding both continued to gain from a positive interest rate environment.
Pretax profits for the period from Asia jumped 23% to US$9.4bil, representing 88% of group pretax profits.
Flint re-emphasised Asia as one of the bank’s strategic targets in his June presentation. The bank has not seen any impact yet either on its own performance or that of its customers from rising US-China trade tensions, Flint said, but is concerned about how tit-for-tat tariffs could affect investor confidence.
“I’d be concerned the general rhetoric has a bad impact on investor sentiment and investors go risk-off,” Flint told Reuters.
The bank’s pretax profit of US$5.96bil in the April-June quarter was higher than the US$5.79bil average of analysts’ forecasts compiled by the bank.
First-half reported revenues rose 4.2% to US$27.3bil.
HSBC shares in Hong Kong partially erased their gains after the results to be up 0.7%, in line with the broader market.
HSBC said it has set aside US$765mil to resolve a civil claim by the US Justice Department over allegations the bank missold toxic mortgage-backed securities in the run-up to the 2007-8 financial crisis.
The settlement wiped out almost all of the bank’s profits for the first half of the year in North America, where it is trying to turn around a US business that has for years underperformed.