HSBC Holdings should post a healthy increase in interim profits, helped by a first half that offered a markedly better operating environment than the first six months of 1994. 'I think the first half will be very strong,' said Baring Securities' Carmel Wellso, who is expecting a 17.9 per cent rise in attributable earnings to GBP1.1 billion (about HK$13.6 billion). Last year, the bank's securities trading was hit by a sudden turnaround in the market after the US Federal Reserve embarked on the first of a series of interest rate rises. This year dealing profits might be flat but would be a turnaround from last year's loss, Ms Wellso said. HSBC Holdings' foreign exchange operations had also reportedly returned a good result over the period, she said. Brokers Vickers Ballas said: 'Stability in global capital markets points to higher dealing profits at Midland Bank this year, albeit the corporate loan market in the UK remains competitive.' Vickers Ballas expected the bank to report that its operating earnings had rebounded with the help of more buoyant loan growth in Hong Kong, coupled with revived trading activities after last year's lower dealing profits. The bank was a core holding for investors, it said. Vickers Ballas projected higher dealing profits at Midland Bank this year, although the corporate loan market in Britain was still competitive, and Marine Midland had been continually improving as the US economy improved. But Vickers Ballas warned that HSBC Holdings' loan provisions might rise moderately this year, in line with loan growth. The bank had 'considerable flexibility to lower provisions last year, which helped prop up the bottom line during an otherwise difficult period'. An analyst with a Japanese house predicted that Midland Bank's results would be solid, while Marine Midland appeared to be in recovery mode. The analyst expected further improvement for HSBC if property companies lowered prices to sell apartments. 'If they're willing to keep on cutting prices to offload stocks, it should generate more demand for mortgages,' he said. Sun Hung Kai Securities' John Wong is predicting 18.7 per cent higher attributable earnings for HSBC. He said the results from other British clearing banks augured well for Midland Bank. Lloyd's, whose dealing operation was comparable to Midland, had made GBP300 million. Mr Wong said he was projecting half-year dealing profits of about HK$1.6 billion as the dealing operation returned to the black. An analyst with a British merchant bank has predicted mortgages will continue to show signs of a pick-up. At the same time, he said, a combination of infrastructure projects and easing rates would underpin stronger demand for construction and other loans. He expected growth of non-mortgage and non-trade finance loans for use in Hong Kong to drop from 18.7per cent in May 1994, to 13.5 per cent in May this year. Domestically, Hongkong Bank had performed well in the first half on the back of buoyant demand for trade finance and corporate loans, and partial relaxation of lending for residential mortgages.
