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Investment bank weakness hits HSBC

HSBC is still generating plenty of capital, but the investment banking arm is under pressure and the net interest margin has continued to slide
August 5, 2014

Even after adjusting for last year's exceptionals - when earnings were inflated by such factors as disposals and an accounting gain from the reclassification of a holding in China's Industrial Bank - and HSBC's (HSBA) underlying half-year pre-tax profit still fell $0.5bn (£0.3bn) to $12.6bn.

IC TIP: Buy at 638.7p

That was partly down to a further $234m provision to cover customer redress costs in the UK (essentially, PPI-related compensation). Of more significance, however, was a lacklustre performance at the lender's global banking and markets division (investment banking). Revenue there fell 9 per cent, primarily driven by a slide in foreign exchange-related activity amid continued low levels of volatility. That's hardly ideal given that the division generated 41 per cent of profit in the half, leaving it as the lender's largest profit centre.

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