HSBC Second-Half Net Rises 17% as Asia Offsets U.S.
HSBC Second-Half Net Rises 17% as Asia Offsets U.S. (Update2)
By Jon Menon and Ben Livesey
March 3 (Bloomberg) -- HSBC Holdings Plc, Europe's biggest bank by market value, said second-half profit rose 17 percent as emerging-markets lending outweighed losses on U.S. subprime- mortgage related assets and consumer loans.
HSBC gained as much as 3.3 percent in London trading after saying net income increased to $8.24 billion, or 69 cents a share, beating analysts' estimates. The London-based company wrote down $2.1 billion of asset-backed securities, leveraged loans and holdings guaranteed by bond insurers in 2007 and raised its dividend by 11 percent to 90 cents.
The last of Britain's largest banks to post results boosted earnings in fast-growing markets including Hong Kong, China and India and reduced its dependence on the U.S. Chairman Stephen Green named Brendan McDonagh last month to head the U.S. after scaling back riskier loans and closing units to control bad debts, which jumped 63 percent to $10.9 billion in the half.
``There doesn't seem to be too much for investors to be concerned about that they weren't aware of already,'' said Colin Morton, who helps manage 1.5 billion pounds, including HSBC stock at Rensburg Fund Management in Leeds, England. ``Financially HSBC is very strong.''
HSBC rose 3.1 percent to 790 pence at 1:25 p.m. after exceeding the $7.88 billion median profit estimate of 13 analysts surveyed by Bloomberg. It earned $7.1 billion, or 62 cents a share, a year earlier. The bank is down 6.3 percent this year, valuing it at 93.6 billion pounds ($185 billion). The FTSE All-Share Bank Index has fallen 9.8 percent.
The bank added Asia head Sandy Flockhart and investment- banking chief Stuart Gulliver as executive directors on its board from May 1, according to a separate statement.
Pretax profit rose 5 percent to $10.1 billion. The company reported a $2.34 billion loss in North America, down from a profit of $927 million. Earnings from Hong Kong, the fastest- growing unit, rose 59 percent to $4 billion.
Profit before tax surged 43 percent to $2.67 billion for the rest of Asia Pacific, 35 percent to $4.5 billion in Europe, and 35 percent to $1.18 billion in Latin America. The earnings included one-time gains of $2.5 billion.
``The economic slowdown and the credit outlook in the U.S. may well get worse before they get better,'' Green said in today's statement. ``With significant parts of the international financial system in developed markets still in difficulties, HSBC's emphasis on faster-growing emerging markets means that we are better positioned than many of our competitors.''
Prospect Heights, Illinois-based Household International, which HSBC bought for $15.5 billion in 2003, lent directly to customers with subprime credit. Rising U.S. mortgage defaults sparked a six-month credit freeze that has forced the world's biggest financial institutions to set aside more than $180 billion in asset writedowns and bad loans.
``They need to run down their subprime business in a methodical way and manage the impairment charge,'' said James Hutson, an analyst at Keefe, Bruyette & Woods Ltd. in London who has a ``market perform'' rating on the stock. ``But it's a harder market to sell your assets.''
HSBC investor Knight Vinke Asset Management LLC has sought an independent review of HSBC's strategy and said it should consider ``radical alternatives'' including spinning off its U.S. business. Green told reporters today the proposal is ``unreasonable,'' and said on a