HSBC, the third-largest banking group in the world, described the UK credit market as the “most difficult” in the world, said The Times Online, as the group blamed rising interest rates, a subdued property market and slowing employment growth in Britain for a $537m jump in bad debt provisions to $3.3bn.
But while the news was bad for the UK, credit quality remained “mainly benign” across the rest of the globe, and results for the six months to June 30 were better than analysts had expected, with a rise in pre-tax profit to $10.64bn from $10.12bn in 2004, though this was partly because results were reported under the new IFRS accounting standards for the first time, making direct comparisons more difficult.
HSBC derives “less than a quarter” of profits from the UK, said the BBC. Consumer bad debt fell in the US, and the group has been targeting growing middle class markets in Brazil, Mexico and China. Profits in mainland China “have grown five-fold” since HSBC’s 2004 investment in Bank of Communications.
This all makes for “an appealing mix: a stable footprint in big, mature economies, spiced up with rapid growth in emerging markets,” said Lex in the FT. But “the picture was spoiled” by the investment banking division, where earnings fell 18%, as expansion costs hit profits.
HSBC has opportunities to invest in retail, commercial and private banking in 77 countries – does the world need “yet another investment bank”