Asia-Pacific News

HSBC H1 adjusted pre-tax profit up 2% at $13BN with Reuters

HSBC reported a 2 percent year-on-year rise in adjusted pre-tax profit to $13 billion for the first half, after a strong performance in Hong Kong.

The banking group, which in June gave an 'investor update' that contained swingeing cost cuts and planned sales, said that reported profit before tax was up 10 percent to $13.6 billion in the six months to June 30, when compared to the same period in 2014. The numbers beat an average of analysts' forecasts of $12.5 billion.

HSBC also said it would sell its entire Brazil business to Banco Bradesco for $5.2 billion.

Asia provided 69 percent of the bank's reported profit, or $9.4 billion, with the improved income driven by China's first-half stock market boom and a resurgent enthusiasm for investing among Hong Kong retail customers.

"HSBC's wealth management revenues in Hong Kong from equities, mutual funds and asset management increased significantly," Chairman Douglas Flint said in the earnings statement.

Will the sale of Brazilian unit save HSBC?

China's stock markets have been a boon for the lender, driving profits for the bank's broking business in Hong Kong via the Stock Connect trading link with Shanghai as mainland shares soared prior to their June crash. The market turmoil in recent weeks could mean a gloomier outlook for the second half for the bank, however, if investors' souring on Chinese stocks curbs their buying of shares and related investment products.

"The bank's profits benefited from the boost from Stock Connect before the market turned, so I wouldn't extrapolate the same level of performance into the third quarter and beyond," said Ian Gordon, analyst at Investec Securities in London.

In the June investor update, Chief Executive Stuart Gulliver pinned HSBC's fortunes on a 'pivot' to the region and its fast-growing economies, outlining plans to sell the bank's businesses in Brazil and Turkey as well as cut almost 50,000 jobs.

At about 1.8 times book value, the price Bradesco is paying for HSBC's Brazilian business is substantially more than expected. But the deal will help Bradesco close the asset gap with state-controlled Caixa Economica Federal and larger private-sector rival Itau Unibanco.

The HSBC unit's focus on high-income customers also suits Bradesco's plan to ramp up sales of specialized financial services for the wealthy and larger corporations.

Earnings per share came in at 48 cents per share, down from 50 cents, and operating expenses were up 7 percent at $17.6 billion.

HSBC's stock was flat in Hong Kong in afternoon trading, against a 1 percent drop across the benchmark Hang Seng.