HSBC profits more than double as bad debts slide
Asia-focused global banking giant HSBC said Monday its first-half net profits more than doubled to 6.76 billion dollars as it slashed US bad debt and raised earnings in emerging markets.
The news sent shares in Europe's biggest bank soaring by more then five percent and helped lift investor sentiment on global markets, alongside unexpectedly strong second-quarter profits from French bank BNP Paribas.
"As we focus on building a high quality asset base for the future, it is encouraging that loan impairment charges now stand at their lowest levels since the start of the (global) financial crisis," HSBC chief executive Michael Geoghegan said in an earnings statement.
Charges "almost halved overall, reducing by 6.8 billion dollars (5.19 billion euros) to 7.5 billion dollars year-on-year.
"This reflects the benefit of more stable economic conditions for many of our customers and follows our actions, begun before the crisis, to reduce exposure to unsecured lending outside our key relationships, to exit unprofitable business lines and to tighten underwriting standards for new business," Geoghegan added.
In remarks in Hong Kong, where he is based, he said that emerging markets and mainland China would continue to be the bank's priority for investments.
"The US will remain weak for some time and hence HSBC will continue to focus on the emerging markets," he told a press conference.
In North America, HSBC posted pre-tax profit of 492 million dollars compared to losses of 3.7 billion dollars in the first half of 2009.
That was the first time for three years that the North American unit had reported a first-half profit. However, on an underlying basis, the result was a loss of 80 million dollars.
HSBC added that across the group, pre-tax profits more than doubled to 11.1 billion dollars in the first half, comfortably beating analyst expectations for 9.3 billion dollars.
"Despite increasing economic uncertainty towards the end of the period, we saw appetite for credit grow steadily, especially among our business customers," Geoghegan said.
"We grew loans and advances to customers in all regions and by four percent overall, compared with the end of 2009. Geographically, the strongest growth was in Asia, where we grew lending by 15 percent."
HSBC, founded in Hong Kong and Shanghai in 1865, sees Asia as its most important region and reflecting that view, Geoghegan relocated to Hong Kong from London earlier this year, although the group remains headquartered in the British capital.
The bank said that across Asia, pre-tax profits increased by 20 percent to 5.6 billion dollars in the first half.
"The contribution of Asian profits generated outside Hong Kong grew to 50 percent, underlining our growing presence across the region," Geoghegan said.
Pre-tax profits in Latin America increased 36 percent to 900 million dollars. Earnings dropped 39 percent to 393 million dollars in the Middle East but "were well ahead of the second half of 2009," HSBC said.
HSBC shares soared 5.26 percent to close at 680 pence on London's benchmark FTSE 100 index, which climbed 2.65 percent to finish at 5,397.11 points.
HSBC said it would pay an interim shareholder dividend of 16 cents per share.
Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said HSBC had kicked-off the British banking's earnings season in "some style."
He added: "The company has been in the thick of the action since day one (of the financial crisis), being one of the first to highlight the sub-prime (home loan) meltdown.
"Although the bank inevitably suffered throughout the crisis, it maintained its dividend and was bolstered by its significant Asian exposure."
HSBC is the first major British bank to post first-half results. It will be followed by nationalised lender Northern Rock on Tuesday, Lloyds and Standard Chartered on Wednesday, Barclays on Thursday and Royal Bank of Scotland on Friday.
© 2010 AFP