The earnings report from HSBC Holdings (NYSE: HBC) came out very strong this morning. The UK-based bank reported first half profit before tax of $11.1 billion, up 121% from the first half of 2009. More than half of that amount, $6.41 billion is attributed to lower loan impairment charges and loan-loss provisions. BNP Paribas SA, France’s largest bank, also reported this morning that its profits rose 31% due to fewer bad loans.
HSBC is the first of London’s largest banks to report earnings. Later this week Royal Bank of Scotland Group (NYSE: RBS) and Barclays (NYSE: BCS) will report earnings. Before RBS announces its results, the bank is expected announce the sale of 318 of its UK branches to Spain’s Banco Santander SA (NYSE: STD) for about $2.8 billion and its merchant services group to other buyers for $3-$3.9 billion. The sale of the RBS assets was forced on the bank as a condition of its government-financed bailout.
The first-half profit at HSBC beat an average forecast of $9.1 billion. HSBC’s investment banking group posted earnings of $5.6 billion, down from $6.3 billion in the same period a year ago, but second only to the first half of 2009 as the bank’s best performance ever.
A good deal of HSBC’s success derives from the bank’s business in Asia, which accounted for $5.9 billion of net profit. The Asian business and the lower impairment charges account for HSBC’s total net earnings for the first half of 2010, offsetting $781 million in lower interest income.
The bank will pay a second interim dividend of $0.08/share, bringing the total dividend for the first six months of the year to $0.16.
HSBC’s tier one ratio was 11.5% for the first half of 2010 and its core tier one ration was 9.9%. The core ratio was raised from 9.4% at the end of December 2009. HSBC also boosted its total assets by $54 billion in the first half of the year.
One London-based analyst told Bloomberg News that the bank’s results were “poor quality” because lower loan losses hid a miss on expected revenues. HSBC simply brought forward its anticipated lower provisioning gains.
HSBC shares are up about 4.5% in early trading this morning. Barclays shares are trading up about 3.5%, while Banco Santander and RBS are both up more than 5%.
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