Profits Drop At HSBC's Private Bank, Assets Hold Steady

Tom Burroughes, Editor, London, 3 August 2009


The pre-tax profit at HSBC Private Bank, part of the UK/Hong Kong-listed banking giant, fell to $632 million in the six months to 30 June from $822 million in the same period a year ago.

Net operating income at the private bank fell to $1.575 billion from $1.92 billion, HSBC said in a statement today.

The private bank’s revenues were reduced by lower values of funds under management, reflecting lower market turnover and drops in equity markets and preference by clients for lower-risk assets. In addition, disposal gains recorded in 2008 did not recur, the firm said.

Client assets held steady at $345 billion. Net new money fell during the period, although there were net inflows from Asia and Latin America, while intra-group referrals generated more than US$2 billion of net new money, HSBC said.

For the banking group as a whole, it logged a pre-tax profit was $5 billion, down 51 per cent on the first half of 2008 but significantly better than the second half of 2008, the bank said.

HSBC said its Tier 1 capital ratio rose to 10.1 per cent from 8.3 per cent at 31 December 2008 last year.

“HSBC's strategy remains unchanged. This is to combine our emerging markets leadership with a global network that offers the advantage of international connectivity and scale, making HSBC the leading international bank. If anything, the recent financial and economic turmoil has only reinforced our conviction that this strategy is the right one,” Stephen Green, HSBC group chairman, said.

Like Barclays, its UK-listed rival, HSBC has not called on the UK government for an injection of public funds, giving it a degree of freedom to act in the area of corporate pay. Two of its rivals, Royal Bank of Scotland and Lloyds Banking Group, have received public funds.

The banking group has had traditionally strong connections to the Hong Kong and mainland Chinese markets, and has been looking to tap the growing wealth of the Asian giant and an expanding, affluent middle class.

“Mainland China remains key to our growth strategy. We opened 8 new HSBC-branded outlets in the country during the [half-year] period, and remain on track to have around 100 by the year-end. We have the strongest rural presence of any international bank in mainland China, and added 2 new rural banks, bringing the total to 5. Hang Seng Bank also opened 2 new outlets in the period, bringing their total to 36,” said Michael Geoghegan, group chief executive.

HSBC has continued its expansion of wealth management opertins in India, a key growth sector, he added.


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