HSBC: healing the lion's jaws

The bad news is cost: adjusted operating expenses were up by 7 per cent. The bank is targeting positive 'jaws' for the full year - this being the gap between the rate of growth in adjusted revenue and the rate of growth in adjusted operating expenses. Revenues were nearly 3 percentage points lower in the first half, and management admits it faces a substantial challenge in making this up over the rest of the year. It is less than two months since the bank pledged to find $5bn in annual cost savings by 2017, with a large amount of that coming through job cuts.

The good news is the progress on HSBC's restructure. Effective after the half-year, the bank agreed the sale of its Brazilian business to Banco Bradesco for $5.2bn. Even within the period, reductions to risk-weighted assets combined with profits to boost its tier one capital ratio from 11.1 per cent at the end of December to 11.6 per cent at the end of June.

Management is keen to correct any misinterpretation that the entire re-investment of risk-weighted assets is headed for its Asian business. Around half will be spread across Europe, the Middle East and North Africa, North America and Mexico. But the bank will only divert capital towards areas that provide a return on equity above 10 per cent - it will look at returning any excess to shareholders as a special dividend or share buyback.

Analysts at Investec Securities expect pre-tax profit of $22.4bn for the full financial year, and EPS of 77¢. That compares with $18.7bn and 69¢ in 2014.