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Pre-Tax Profits Slip At HSBC's Global Private Banking Arm

Tom Burroughes, Group Editor , London, 9 November 2011

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UK/Hong Kong-listed HSBC said pre-tax profits for its global private bank fell in the third quarter and in the first nine months of 2011 from their comparable periods a year ago.

UK/Hong Kong-listed HSBC said pre-tax profits for its global private bank fell in the third quarter and in the first nine months of 2011 from their comparable periods a year ago, with revenue rises more than offset by rising Swiss franc-denominated operating costs, rising regulatory burdens, and more hires.

Pre-tax profits for the nine months to 30 September were $800 million, down from $830 million a year ago; in the three months to end-September, the figure was $248 million, down from $274 million a year before.

At the end of September, HSBC’s private bank had a cost-efficiency ratio of 67.4 per cent, up from 63.7 per cent a year before. This ratio is still some way below the global average in wealth management of almost 80 per cent, according to latest industry figures (Source: Scorpio Partnership).

For the banking giant as a whole, HSBC said profit before tax for the third quarter was $7.2 billion, up $3.6 billion on a year ago, and for the nine-month period it was $18.6 billion, up $4.0 billion on the same period in 2010. These results included $4.1 billion of favourable movements in credit spread on the fair value of HSBC’s own debt recognised in the quarter and $4.0 billion for the nine months.

"The sector faces significant headwinds. The continuing macroeconomic, regulatory and political uncertainty, particularly in Europe, adversely affected our industry's performance in the quarter,” Stuart Gulliver, HSBC group chief executive, said in a statement today.

“As a result, our underlying pre-tax profit declined by $1.6 billion compared with 3Q 2010 due to lower revenues in global banking and markets, an adverse movement in non-qualifying hedges and an increase in loan impairment charges, primarily in North America, partially offset by increased revenues in commercial banking,” he said.

“We have taken steps towards our target of delivering $2.5-3.5 billion of sustainable cost savings by the end of 2013. Our programmes to review head offices and global functions are progressing well. Since the first quarter of 2011, [full-time employees] have decreased by 5,000. We have identified a significant pipeline of sustainable savings and remain confident that we can hit our target range,” he continued.

“During the quarter we increased revenues in Asia and Latin America on 3Q 2010 as a result of strong asset growth in late 2010 and the first half of 2011, notably in commercial banking and global banking and markets, reflecting our focus on investing in regions with higher returns,” Gulliver added.

Reported revenues for the quarter were $4.6 billion higher than a year ago and, for the nine months were $4.7 billion higher than the comparable period in 2010.

Private banking

Total operating expenses in global private banking were $1.7 billion in the nine months to end-September, up from $1.466 billion a year before.

The bank had a Core Tier 1 capital ratio – a key barometer of a bank’s financial strength – of 10.6 per cent at the end of September.

 

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