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  • Apr 17, 2014
  • Updated: 12:46pm

HSBC

The Hongkong and Shanghai Banking Corporation was founded in Hong Kong on March 3, 1865, and in Shanghai one month later. In 1980, HSBC acquired 51 per cent of Marine Midland Bank, buying the rest in 1987. HSBC Holdings was established in Britain in 1991 as the parent of The Hongkong and Shanghai Banking Corporation ahead of its purchase of the UK-based Midland Bank and the impending 1997 transfer of sovereignty of Hong Kong from Britain to China. 

BusinessBanking & Finance
BANKING

HSBC tipped for surge in pre-tax earnings

While analysts are eyeing US$5.4b for bank's third quarter, they also point to likelihood of raised provisions and a drop in return

PUBLISHED : Thursday, 31 October, 2013, 10:49am
UPDATED : Friday, 01 November, 2013, 5:24pm

Banking giant HSBC is set to report a surge in third-quarter pre-tax profit next week on the back of its fast-growing Asia-Pacific business and increased trade flows.

However, the results may be tempered by the need to set aside more provisions for legal costs and a drop in the return on its fixed-income investments.

The average estimate by five analysts in a Bloomberg survey of pre-tax profit for the quarter is US$5.4 billion. That translates into a leap of 54.2 per cent from a year earlier.

Excluding one-off gains on the disposal of assets and fair-value changes in the bank's own debt, underlying pre-tax profit is expected to increase by 8 per cent. Business in Hong Kong, which contributed 29.9 per cent to the group's pre-tax profit in the first half, and the rest of Asia, which accounted for 35.9 per cent, continued to be the leading contributors to the group, analysts said.

They cited the underlying economy growing at a rate outpacing that of other regions.

Increased global trade flows also brought extra revenue to the commercial banking arm, regarded as the core business of the group.

However, some analysts said they were concerned about the impact on HSBC from the prospect of interest rates picking up.

The London-based bank's global peers, especially the US lenders, including Citigroup, JPMorgan Chase and Wells Fargo, showed weakness in revenue from fixed-income trading and mortgage banking.

"HSBC is trying to grow its revenue, but in general, the global banks had weak results in the third quarter on increased provision on fixed income," Credit Suisse analyst Sanjay Jain said. He expected HSBC's revenue to further decline by 4 per cent from the previous quarter.

Yields on US Treasury securities rose in the third quarter after the Federal Reserve announced plans to scale down its quantitative easing monetary policy.

Banks' returns on fixed-income investments were adversely affected.

"The US banks could be in a better position than the British HSBC as the US economy is improving," Jain said. "Europe and the other markets are not growing very fast."

HSBC, which missed the market consensus for its first half, could be hit again by the uncertainty over its massive provisions for legal costs when it posts the third-quarter results on Monday, according to some analysts.

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