HSBC share price rises despite profits slumping 12%

The 'world's local bank' reported a fall in investment banking revenue and criticised the 'unprecedented' regulatory burden.

by Rachel Savage
Last Updated: 04 Aug 2014

HSBC has styled itself as the ‘world’s local bank’ for several years now and its strong overseas presence helped avoid a government bailout a la RBS and Lloyds, while also enabling it to maintain a relatively large investment banking business. But even that strategy couldn’t stay foolproof forever, as economic growth in Asia slowed.

The bank’s pre-tax profits fell 12% year-on-year to $12.3bn (£7.3bn) in the first half of 2014, as revenue slipped 9% to $31.2bn. It took a big hit in Asia, where profits slumped almost 15% to $7.9bn, while investment banking revenue dropped 12% to $5bn.

Chairman Douglas Flint also made sure to lay into regulation, a day after he wrote to George Osborne asking him to move back the 2018 deadline for ringfencing investment and retail banking.

‘The demands now being placed on [the firm]… are unprecedented,’ Flint said, adding that ‘increasingly fragmented’ and ‘still evolving’ regulatory reform was eating up ‘resources that would otherwise be customer-facing’. ‘I do not think we have ever had to ask so much of so many’, he said in a rather Churchillian tribute to the bank’s staff.

He also warned of the danger of ‘disproportionate risk aversion creeping into decision-making’ as the long arm of the law reaches back into the past to whack bankers and their employees for old misdemeanours. ‘We can address this behaviour through training and leadership, but we also need clarity from public policy and regulatory bodies over their expectations in this regard,’ Flint said pointedly.

HSBC also took another $234m charge for compensating customers for PPI-misselling, $151m of which was for the quarter to June 30. Despite the less-than-stellar results though, it seems investors didn’t get any nasty surprises: shares ticked up more than 0.5% in mid-morning trading, having dipped straight after results came out.

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