HSBC, Standard Chartered give investors glimpses of their cost cuts and bets on Asia when they post first-quarter results this week
- City’s lenders, grappling with declining net interest margins, are putting greater focus on wealth, fee-generating products
- Hong Kong’s economy is expected to recover this year after contracting 6.1 per cent in 2020, sharpest decline on record
Investors will be watching this week to see whether historically low interest rates gash the bottom lines of Hong Kong’s banks in the first quarter as economic conditions in the city begin to normalise.
HSBC and Standard Chartered are both based in London, but both count Asia as the biggest contributor to their earnings. Their financial results this week will offer investors a glimpse into the efficacy of their efforts to trim costs and put greater emphasis on rising affluence in the region, anchored by China’s expanding economy while the rest of the world remains stuck in the coronavirus pandemic.
HSBC and Standard Chartered should show a positive progression in their first-quarter revenue from the second half of last year, according to Morgan Stanley’s analyst Nick Lord. Quarterly revenue is forecast to decline 3.5 per cent at HSBC from a year earlier, and 10 per cent at Standard Chartered, partly because of continued pressure on net interest margins, he said.
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Net interest margin “should stabilise [quarter on quarter], while loan growth is expected to be solid, and markets and wealth revenues should hold up well after a strong 2020,” Lord said in an April 14 research note. “Credit costs are forecast to fall vs. recent quarters, but still remain elevated vs. 2019 levels.”