HSBC reports pretax profit of $1 billion on MENA operations
HSBC has reported that its profit before tax for H1 2014 in the Middle East and North Africa is up nine per cent on both reported and constant currency bases.
On an underlying basis, profit before tax increased by $93 million, mainly due to higher revenue and increased income from associate, The Saudi British Bank. HSBC’s share of profits from associates and joint ventures rose by 15 per cent, mainly from SABB, being driven by higher revenue thanks to strong balance sheet growth.
In the UAE, HSBC said it has made good progress in executing the strategic plan announced in 2013. In Retail Banking & Wealth Management (RBWM), HSBC continued to focus on the Wealth Management business through investment in innovative platforms, tablet solutions and an expanded range of products.
The bank also launched an enhanced personal banking proposition, including additional competitive features on personal loans, which was extended to Egypt and Qatar.
In Commercial Banking (CMB), key appointments were made in line with the global strategy to focus the business on client segments and drive intra-regional and global client revenue.
In Global Banking and Markets (GB&M), the bank acted as a coordinator, book runner and joint lead manager for a number of issuances in the UAE and other countries, allowing clients to access HSBC’s global investor base.
In Egypt, in RBWM, HSBC was ranked number one in the Customer Recommendation Index while in GB&M the bank acted as a mandated lead arranger of an EGP 2.3 billion ($330 million) syndicated term loan facility.
During H1, the bank completed the disposal of its operation in Jordan and entered into an agreement to sell the operation in Pakistan. This transaction is expected to complete during H2 2014.
Net interest income was broadly unchanged. Increases in the UAE, primarily in RBWM due to an increase in residential mortgage balances, reflected growth in the property market and improved deposit spreads as a result of re-pricing initiatives. This was partly offset by reduced revenue from lower lending balances and spreads in CMB, reflecting a highly liquid and competitive market. In addition, income increased in Kuwait due to the restructuring of a small number of specific customer loans. These factors were broadly offset by a decrease in Egypt, primarily in CMB from lower customer deposit and lending balances, and in GB&M from declining spreads and lower balances on the available-for-sale portfolio, offset in part by the resumption of interest on overnight placements with the Central Bank of Egypt. In Jordan, net interest income decreased following the announcement to dispose of the business.
In GB&M, net fee income was higher, driven by increased flows in the Equities business which in part reflected the upgrade of the UAE to ‘Emerging Markets’ status in the MSCI index. In addition, there was an increase in advisory mandates in Project and Export Finance in Capital Financing. This was partially offset by lower fees in RBWM relating to the Insurance and Wealth Management businesses following various repositioning initiatives.
Net trading income decreased by five per cent, primarily in Algeria following regulatory restrictions on foreign exchange spreads charged on corporate customer transactions. This was coupled with a decrease in Qatar from lower forex revenues reflecting a reduction in trading volumes from GB&M customers. These factors were partly offset by increased net trading income in the UAE.
Gains less losses from financial investments increased by $21 million, mainly in Egypt, due to the non-recurrence of the loss on disposal of available-for-sale debt securities in H1 2013.
Net loan impairment releases rose by $3 million, primarily in the UAE, driven by net releases of individually assessed allowances in GB&M. However, this was partly offset by lower impairment releases for a small number of UAE-related exposures.
HSBC reported operating expenses broadly unchanged. In Egypt, expenses decreased due to the non-recurrence of charges relating to changes in the interpretation of tax regulations. Offsetting this, expenses rose in the UAE, driven by wage inflation, investment in the Risk and Compliance functions, higher customer facing staff numbers in RBWM and increased service and product support staff in CMB. The bank also noted wage inflation in Qatar.
Source: cpifinancial
