Acquisitions expected to add strength to HSBC's interims

HSBC Holdings is set to post a higher interim profit today according to 10 analysts polled by the South China Morning Post.

They predicted the bank - global banking parent of Hong Kong's biggest lenders, HSBC and Hang Seng Bank - would report a net profit of US$3.6 billion for the six months to June, up 11 per cent from last year's first-half result.

The result will probably be bolstered by the first-time contribution of newly acquired Household International (HI), the biggest independent consumer finance group in the United States and Grupo Financiero Bital, Mexico's fifth-largest commercial bank.

Most analysts expected HI would boost HSBC's net profit by about a tenth during the period. The recent strength of the euro and pound against the US dollar will also boost US dollar-denominated earnings from European business - which accounts for about a third of the bank's income. Analysts said the bank's strong overseas income drivers could mask the stagnant underlying growth of one of its main markets - Hong Kong.

'It's a fairly muddied set of results. You've got the first-time contributions from Bital and Household International alongside the effect of dilution of shares issued to buy Household,' said Keith Irving, head of Merrill Lynch's Asia-Pacific Financial Institutions Research.

ABN Amro's head of Asian Banks Research Andrew Leeming said the HI acquisition would bring a much needed lift to the bank's underlying profitability in the near term at the expense of higher goodwill charges and provisioning.

Stripping out the effect of the HI purchase to reflect a more genuine growth picture, the underlying organic growth at the bank's Hong Kong operations was likely to be muted, analysts said.