HSBC Holdings Plc, Europe’s biggest bank, posted a 57 percent drop in first-half profit after setting aside US$13.9 billion to cover souring consumer loans.
Net income declined to US$3.35 billion from US$7.72 billion a year earlier, the London-based company said in a statement yesterday. That beat the US$600 million median loss estimated by seven analysts surveyed by Bloomberg.
HSBC’s takeover of subprime lender Household International Inc in 2003 contributed to the US$53 billion in provisions the bank has reported in the past three years. Hurt by soaring US bad debts, HSBC decided in March to halt consumer lending at the operation and may review the bank’s credit-card unit in the event that the US economy deteriorates. The bank also raised US$17.8 billion in an April rights offer to shore up capital.
“We expect 2009 to be the peak year of loan losses,” Michael Chang, a Hong Kong-based analyst at Deutsche Bank AG who has a “hold rating” on the stock, wrote in note to clients before the results were published. “The rate of improvement from here is naturally pivotal to near-term earnings valuations of the stock.”
HSBC rose 1.6 percent to 605.75 pence in London trading on July 31, valuing the bank at about £104.9 billion (US$176 billion). The stock has climbed 5 percent in London trading this year. In the same period, shares of London-based Barclays Plc doubled and the 63-member Bloomberg Europe 500 Banks Index advanced 32 percent.
“The timing, shape and scale of any recovery in the wider economy remains highly uncertain,” chairman Stephen Green said in the statement. “Our view continues to be cautious.”
Green said in March that HSBC regretted the decision to buy Household International, now called HSBC Finance.
“It’s an acquisition we wish we hadn’t done with the benefit of hindsight, and there are lessons to be learned,” Green told reporters during a March 2 conference call.
HSBC’s writedowns and credit-market losses are already more than twice those of Credit Suisse Group AG and Barclays Plc, according to data compiled by Bloomberg. HSBC’s US$42.2 billion since the third quarter of 2007 compares with US$20.1 billion at Barclays and US$18.9 billion for Credit Suisse.
Loan loss provisions may not peak for HSBC until next year, though the bank “is arguably the only genuine global bank, which, combined with a funding advantage, means that it is ideally placed to leverage a recovery whenever this happens,” Anil Agarwal, a Hong Kong-based analyst at Morgan Stanley, wrote in a July 17 note to investors.
Unlike RBS and Lloyds Banking Group, HSBC avoided turning to the government for a bailout during the credit crisis.
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
PRESSURE EXPECTED: The appreciation of the NT dollar reflected expectations that Washington would press Taiwan to boost its currency against the US dollar, dealers said Taiwan’s export-oriented semiconductor and auto part manufacturers are expecting their margins to be affected by large foreign exchange losses as the New Taiwan dollar continued to appreciate sharply against the US dollar yesterday. Among major semiconductor manufacturers, ASE Technology Holding Co (日月光), the world’s largest integrated circuit (IC) packaging and testing services provider, said that whenever the NT dollar rises NT$1 against the greenback, its gross margin is cut by about 1.5 percent. The NT dollar traded as strong as NT$29.59 per US dollar before trimming gains to close NT$0.919, or 2.96 percent, higher at NT$30.145 yesterday in Taipei trading