HSBC forecasts stronger profit in second half
Net interest margins have probably bottomed out in Hong Kong and loan growth should continue to grow strongly for the rest of 2010, positioning HSBC for even stronger profits in the second half, according the bank's regional chief.
At a media briefing held a day after the bank announced its interim results, Peter Wong Tung-shun, chief executive of HSBC Asia-Pacific, said the Hong Kong interbank offered rate (Hibor) had been steadily falling since the first quarter. The low interbank rates had put pressure on net interest margins, but there were signs that interbank rates and net interest margins had probably bottomed.
'But they (margins) won't rise all that much because the US Federal Reserve won't raise interest rates any time soon given the continuing high unemployment levels there,' Wong told reporters.
He said keen competition in Hong Kong for savings meant that deposit margins 'cannot go any lower'.
He said he was confident the bank could deliver even better results in the second half because the fall in margins had reversed, and strong loan growth was likely to continue.
But he said the surge in commercial lending in the first half reflected the bank's 'conservative' approach in the year-earlier period.
Net customer loans and advances grew 40 per cent year-on-year in Hong Kong to US$37 billion.
In China, the lion's share of the bank's profits came from its stakes in Bank of Communications and Ping An Insurance, but Wong said it would be unfair to measure HSBC's mainland performance solely through these investments.
'One is the fifth largest lender on the mainland and the other is one of the largest insurers,' Wong said.
In terms of organic growth, Wong said HSBC was still in an 'investment phase' as it continued to open branches and recruit staff.
'Every branch needs at least two and a half to three years to break even,' he said. HSBC currently has 100 branches in China.
Wong said pretax profit for HSBC (China) rose 24 per cent year-on-year without giving more detailed figures.
HSBC added 1.85 per cent in Hong Kong yesterday to close at HK$82.55.