HSBC Holdings plc Interim Management Statement
HSBC has made a strong start to the year despite the turbulence in global financial markets. In the first quarter of 2008, HSBC’s profit was ahead of the equivalent period last year.
Group Chairman Stephen Green said “Our performance so far in 2008 demonstrates that HSBC’s business resilience in difficult financial markets, our global distribution network, diversified earnings streams and strong capital position are allowing us to support our customers in today’s challenging market conditions. These factors enable us to invest for growth, particularly in emerging markets, and focus on long-term value creation for our shareholders.”
Key highlights included:
* Q1 2008 profit ahead of Q1 2007.
* Pre-tax profits up in all major emerging markets in Asia-Pacific, the Middle East and Latin America.
* European businesses performed well with the UK retail business increasing pretax profit.
* US profit down as a result of higher consumer finance loan impairments and additional write-downs in Global Banking and Markets.
* Loan impairment charges in our US consumer finance business were in line with expectations at US$3.2 billion; this compared with US$1.6 billion recorded in Q1 2007 and US$4.6 billion in Q4 2007, in part reflecting seasonal trends.
* Resilient profitability in Global Banking and Markets.
* Good deposit growth in all our geographical regions.
* The Group’s underlying revenue growth was comfortably ahead of Q1 2007 even after absorbing US$2.6 billion of additional write-downs in Global Banking and Markets, and remained positive after also excluding US$2.7 billion of fair value gains on our own debt. Underlying cost growth over the same period was modest.
* Strong capital ratios broadly in line with those at the end of 2007, on a Basel II basis.
* As part of our 2007 full year results announcement, we described a number of the Group’s key financial measures, and provided target ranges. HSBC’s first quarter results either achieved or exceeded them.
The following individually significant items should also be taken into account when considering our performance in Q1 2008.
* The significant widening in credit spreads which occurred during the first quarter, particularly at the end of March, led to fair value gains of US$2.7 billion on HSBC’s own debt recorded at fair value. Most of this reversed in April, as credit spreads on our own debt tightened. These gains were not allocated to our customer groups; they are reported in the ‘Other’ segment in our financial results.
* When comparing Q1 2008 with the same period in 2007, it is important to note the non-recurrence of the dilution gain of US$0.7 billion which was recognised in Q1 2007 following Ping An Insurance’s capital raising at the time.
Michael Geoghegan, Group Chief Executive, said: "I am encouraged by the way we have increased pre-tax profits in every one of the major countries in which we operate in Asia-Pacific, the Middle East and Latin America.
"Also, our Global Banking and Markets business was more profitable than in the preceding two quarters on the back of strong emerging markets performance, despite the write-down of US$2.6 billion.
"Commercial Banking and Private Banking both had record quarters. Our consumer finance business in the US remains challenging but we are vigorously managing our costs and our risks, and working hard to help our customers.
“Our strategy is clear and we are executing it. Ours is a business with excellent opportunities ahead.”
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