If you thought some recent lumpy acquisitions might have given HSBC indigestion, think again.
North American consumer lender Household has been the financial equivalent of a bottle of red cordial, racing past market expectations in first-half results. Even after accounting for goodwill charges and the shares issued to acquire it, HSBC's earnings per share were still up 40 per cent.
An economic pick-up has renewed consumers' appetite for borrowing and at the same time allowed HSBC to feel easier about releasing some of its provisions. Of the US$3.4 billion gain in pre-tax profits, $996 million is attributed to lower debt charges.
Today's HSBC, with consumer lending and personal finance accounting for almost 50 per cent of all profits, also appears to be cleverer as well as bigger. Organic growth - priority No1 - was seen across the group as increased fee income and the deployment of online banking paid dividends. In Asia outside Hong Kong, pre-tax contributions rose 30 per cent to US$973 million, with growth across the board.
And in Hong Kong, despite moribund loan growth and further falls in net interest margins, contributions were up 25 per cent to US$2.58 billion. As tellers have become 'customer service representatives', sales of HSBC financial products portfolio have soared. Commercial banking and corporate and investment banking saw growth of 33 per cent and 24 per cent respectively, helping to cap off a strong report card.
The fallout from increasing Fed Fund rates in the United States is likely to be felt in its next earnings report, especially with North America now accounting for a 33 per cent of operating profit.
