HSBC, Standard Chartered kick-start third-quarter bank reporting with eyes on margins, loan losses amid interest rate hikes

Name: HSBC’s break-up dilemma: why bank’s largest shareholder is pushing for change
Uploaded: 2022-10-23T22:30:23.000Z
Duration: 5 min 25 s
Description: HSBC’s break-up dilemma: why bank’s largest shareholder is pushing for change

Hong Kong’s biggest banks increased their prime rate for the first time in four years in September

Questions remain about how slowing growth, particularly in China, could affect bank bottom lines

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A lion statue outside the HSBC headquarters building in Hong Kong. Photo: Bloomberg

Chad Brayin London

Published: 6:30am, 24 Oct 2022

In another pivotal week for markets, investors will look to the impending report cards from HSBC, Standard Chartered and their peers for direction. Is the banking industry profiting from wider interest margins, or are economic pressures on consumers and businesses translating into more bad loans?

HSBC, the largest of Hong Kong’s three currency-issuing banks, is expected to post a 55 per cent drop in pre-tax profit to US$2.54 billion in the third quarter from a year earlier, based on consensus analyst forecasts compiled by the London-based banking group. The prior year’s quarter included a release of US$659 million in reserves for bad loans.

Standard Chartered probably grew its pre-tax profit by 13 per cent to US$1.13 billion, according to a consensus compiled by the bank. It made US$996 million a year earlier, which was driven in part by gains in financial markets and trade and lower provisions for soured loans.

HSBC will report on Tuesday, followed by Standard Chartered on Wednesday and Bank of China (Hong Kong) on Friday.

Rising rates should help fatten net interest margins on loan products, but the potential upside could be partially defeated next year by higher loan losses amid an uncertain economic outlook, according to analysts at Citigroup.

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HSBC’s break-up dilemma: why bank’s largest shareholder is pushing for change

“HSBC and Standard Chartered might see some modest pickup in credit cost this quarter, the former driven by rising global recession risks and the latter affected by several sovereign downgrades” in emerging markets, Citi analyst Yafei Tian said.