QE sera sera

7 May 2013 By Peter Thal Larsen Follow @Peter_TL

Low interest rates are a drag on the lender’s large deposit base, while economic malaise has depressed loan demand. With no pickup in sight, returns depend on cost-cutting and weeding out underperformers. HSBC must use its forthcoming strategy update to show it has more to do.

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HSBC’s first-quarter pre-tax profit almost doubled over the previous year as the lender demonstrated the benefits of lower costs and a big reduction in bad debt charges.
The bank reported a pre-tax profit of $8.4 billion, up from $4.3 billion in the same period of 2012. Excluding gains from disposals, movements in the value of its own debt, and the effects of reclassifying assets which are being prepared for a sale, pre-tax profit was up 34 percent at $7.6 billion.
Net operating income jumped 14 percent to $18.4 billion, but was up 5 percent to $17.6 billion on an underlying basis. Loan impairment charges halved to $1.17 billion year-on-year.
The bank’s core Tier 1 capital ratio was 12.7 percent at the end of March, an improvement of 0.4 percentage points since the end of December.
By 1300 GMT, HSBC shares were up 2.6 percent at 732 pence.
HSBC is due to issue an update on its strategy on May 15.

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