HSBC prof­its jump 10pc on HK boom

The Pak Banker - - FRONT PAGE -

HSBC Hold­ings beat ex­pec­ta­tions with a 10 per­cent rise in first-half profit thanks to a strong per­for­mance in Hong Kong and said it had agreed a $5.2 bil­lion sale of its busi­ness in Brazil. Europe's big­gest bank by mar­ket value is to sell the un­prof­itable Brazil­ian arm to Banco Brade­sco, Brazil's sec­ond-big­gest pri­vate-sec­tor bank, for a higher than ex­pected 17.6 bil­lion reais ($5.2 bil­lion).

The sale is part of a plan by Chief Ex­ec­u­tive Stu­art Gul­liver to shed un­der­per­form­ing busi­ness and re­duce costs, in­clud­ing al­most 50,000 job cuts, to try to im­prove re­turns. HSBC said its first-half profit growth was driven by an in­vest­ing frenzy in Hong Kong among in­di­vid­ual cus­tomers prompted by China's soar­ing mar­kets ear­lier in the year. HSBC has be­come in­creas­ingly re­liant on Hong Kong for prof­its as its busi­nesses in Europe, the United States and other emerg­ing mar­kets slow. The bank has said it is con­sid­er­ing mov­ing its head­quar­ters back to the for­mer Bri­tish colony.

It in­tends to com­plete a re­view of its head­quar­ters by the end of this year and Hong Kong is seen as the most likely al­ter­na­tive. But the mar­ket tur­moil in China in the past few weeks could mean a gloomier out­look in the sec­ond half of the year.

The bank said its per­for­mance in July was sat­is­fac­tory, but said the bank­ing en­vi­ron­ment re­mained chal­leng­ing and the eco­nomic cli­mate was par­tic­u­larly un­cer­tain in China and the euro zone.

"We're still rea­son­ably con­fi­dent that Chi­nese eco­nomic growth will be at the num­bers we thought pre­vi­ously," CEO Gul­liver said. "While we prob­a­bly haven't fully seen the im­pact of bad debts from the sell-off in the stock mar­ket ... we're still very much look­ing for 7 per­cent or 7.1 per­cent GDP growth this year for China."

China's stock mar­kets have helped to drive prof­its for the bank's broking busi­ness in Hong Kong via the Stock Con­nect trad­ing link with Shang­hai be­cause main­land shares soared prior to their June crash.

It also helped wealth man­age­ment and eq­ui­ties rev­enues in the first half. Gul­liver said those ar­eas could have a more muted per­for­mance in the third quar­ter, but he said the im­pact of the Chi­nese mar­ket sell­off should be lim­ited. "The bank's prof­its ben­e­fited from the boost from Stock Con­nect be­fore the mar­ket turned, so I wouldn't ex­trap­o­late the same level of per­for­mance into the third quar­ter and be­yond," Ian Gor­don, an­a­lyst at Investec Se­cu­ri­ties in Lon­don, said. Asia now ac­counts for two-thirds of HSBC's prof­its, and Gul­liver has pinned the bank's for­tunes on a 'pivot' to the re­gion. HSBC is speed­ing up a cull of un­prof­itable busi­nesses and coun­tries with its plans to cut al­most 50,000 jobs, half of them from selling oper­a­tions in Brazil and Tur­key.

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