LONDON: HSBC Holdings Plc's first-half profits rose by more than half, smashing market expectations and boosting its shares, as the global bank benefited from last year's purchase of US lender Household.
Pre-tax profits for the six months ended June 30 rose 53% to US$9.37bil, from US$6.11bil a year earlier, the world's third biggest bank by market value said yesterday.
Analysts had expected profits of about US$7.75bil, according to the median of 10 estimates that ranged from US$7.39bil to US$8.45bil.
US consumer finance business Household contributed US$1.9bil to first-half pre-tax profita, compared with US$536mil in the three months after HSBC bought it last year.
HSBC's bad debt charge rose to US$2.8bil from US$1.54bil because of Household, but the figure was below most analysts' estimates, which went above US$4bil.
“This is a strong result,” chief executive Stephen Green said in an interview. “If you look at the performance of Household, we are pleased with it.”
HSBC was transformed when it bought Household in March last year for US$14.8bil. The takeover, HSBC's biggest, roughly doubled the share of profit from north America to about a third, but added customers with patchy credit records to historically conservative HSBC.
“It looks as if they are strong in all areas,” said Jim Wood-Smith, head of equity strategy at Barclays Private Clients, which holds HSBC stock. “It's nice to see the share price bounce.”
Green warned that the US and world economies would slow next year and said the high price of oil and increased borrowing by investment companies were concerns.
He added that the trading environment for HSBC's investment bank had worsened in the second quarter but said trading profit was at “a level we are comfortable with”.
Pre-tax profits, excluding goodwill at HSBC's corporate and investment banking unit, rose 24% to US$2.76bil.
“HSBC is a tremendous proprietary dealing machine, but there was a sense of nervousness that proprietary trading profits could be under pressure, so we were relieved with these results,” Wood-Smith said. – Reuters