Europe’s leading
banking groups have reported a mixed set of results, with standout
performances notable from a number of lenders including HSBC, BNP
Paribas and Société Générale. But the common theme of the interim
results was one of caution as regards growth prospects for the rest
of 2010. Douglas Blakey reports.
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The statement from Société Générale
(SocGen) came as close as any to summing up the mood of the
European half year reporting season: “In Europe, in particular,
growth prospects remain moderate.”
RBI’s analysis of the
interim results from Europe’s 50 biggest banks by assets highlights
an industry that remains divergent in performance.
The RBI tables show it is
HSBC, BNP Paribas (BNPP) and Santander which remain frontrunners in
terms of pre-tax profit, with rival European heavyweights such as
Barclays and BBVA posting resilient results.
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By GlobalDataBuilding the customer
base
HSBC posted pre-tax profits of $11.1bn for the first half, more
than double the year ago period (H109: $5.0bn).
HSBC’s retail focused Personal
Financial Services division returned to the black in the first
half, with pre-tax profits of $1.2bn, compared with a loss of
$1.2bn in the first half of 2009.
Retail banking highlights included
the ongoing success of HSBC’s flagship mass-affluent Premier
account. HSBC said that a net 469,000 customers signed up to
Premier in the first half of 2010, taking the total Premier
customer base to 3.9m.
Michael Geoghegan, HSBC chief
executive said: “We are on track to build the [Premier] customer
base to 6m by the end of 2011. Revenues from Premier customers can
be over four times that generated by a standard account in the
current interest rate environment.”
HSBC’s Advance product, an
all-in-one packaged account targeted at current account customers
in the mid-market segment, was rolled out at the start of the year
and has already attracted 3.6m customers across 22 markets.
More than half of HSBC’s first-half
profits were earned in Asia, where pre-tax first-half profits of
$5.6bn were 20% up year-on-year.
A strong performance in Latin
America resulted in first half profits of $900m, up 36% but pre-tax
profits in Europe fell by 19% to $2.8bn.
Profits up across
the board
In terms of size, BNPP remains the largest European bank by
assets with €2.23trn ($2.83trn). Barclays has become the UK’s
biggest bank by assets and the second-largest in Europe, marginally
overtaking Royal Bank of Scotland (RBS) by that measure.
Barclays first half pre-tax profits
– up by 44% from a year ago to £3.95bn ($6.11bn) – highlighted the
bank’s increasing reliance on Barclays Capital, that unit posting
pre-tax profits up 32% to £2.55bn.
By contrast, Barclays’ global
retail banking profits rose by only 7% to £901m, with the bank’s
UK-based retail unit beating analyst forecasts with profits before
tax up 61% at £504m.
RBS returned to profitability in
the first half compared with a net loss of £1.04bn for the year ago
period.
RBS CEO Stephen Hester downplayed
the results and said it was too early to say if RBS will make a
profit for the full year.
RBS said operating profit at its UK
retail division increased from £37m a year ago to £416m for the six
months to 30 June. Group-wide impairments fell from £7.52bn a year
ago to £5.16bn, while RBS was also boosted by improved margins.
UK retail highlights included an
increase in client numbers, with total current account customers
hitting 12.9m, an increase of 267,000 from a year ago.
Total customer lending grew 9%
year-on-year while UK retail deposits were up 8%, with savings
deposits up 9% and current account balances up 5%.
“Gradual improvement in net
interest margin is targeted in the second half, while
markets-related revenue are likely to continue to reflect changes
in economic confidence and seasonality,” Hester said.
French
flair
In terms of assets, three banks in the top 10 are from France –
BNP Paribas, Crédit Agricole and SocGen – with BPCE, the French
banking giant formed from the merger between Banque Populaire and
Groupe Caisse d’Epargne, ranked in 11th place.
BNPP posted first half pre-tax
profits of €7.52bn, up 68.5% from the corresponding period last
year, boosted by a strong retail performance.
In particular:
“BNP Paribas confirmed the
effectiveness of its diversified, integrated and client-centric
business model,” said CEO Baudouin Prot.
Lending at BNPP’s domestic retail
unit was up 3.3% while retail deposits grew by a healthy 7%.
BNPP said that it had scored an
early distribution hit with its mobile banking channel, already
attracting 100,000 regular monthly users in France.
Rival SocGen posted a surge in net
income for the first half of 2010 – at €2.15bn compared to €31m in
2009 – and said it remained on track to meet its target of €3bn for
the full year.
SocGen’s domestic retail banking
division posted net banking income of €591m in the first half of
2010, a 15% rise from the comparable period of 2009.
Elsewhere, the opening of over
53,000 accounts from each of SocGen’s domestic retail banking
brands (Société Générale, Credit du Nord and Boursorama) made for
robust growth in the second quarter of 2010.
In terms of international retail
banking, net income fell 3.2% to €239m in the first half of 2010,
compared to the year-ago period.
Compared to BNPP, SocGen has
benefitted less from a fall in provisions for bad debts. In the
second quarter, SocGen made provisions of €1.01bn, down 6% on the
same quarter last year, but BNPP’s provisions fell by more than
50%.
Spanish
strength
The continued strength of Spain’s biggest two banks, Santander
and BBVA, remains a testament to their respective business
strategies as well as a cautious national regulator.
Profits before tax at Santander
were up 7.1% from a year ago to €6.33bn. Santander chairman Emilio
Botin said that the bank was on course to match its fiscal 2009
results.
In the first half of the current
fiscal year, Santander’s retail strength was highlighted by the
retail banking unit generating 85% of total gross income and 72% of
attributable profit.
Santander’s drive to increase
deposits resulted in customer deposits soaring by 23% year-on-year
to €595.3bn, including:
Non-performing loans across the
group continued to rise, however, hitting 3.37% of total lending at
the end of June, up from 2.82% a year earlier and from 3.34% at the
end of the first quarter. Retail banking net loan-loss provisions
increased 5.1% year-on-year.
Although first half pre-tax profits
fell by 8.8% to €3.65bn at BBVA, Spain’s second-largest bank’s
results beat analyst forecasts, thanks to a slight upturn at its
domestic unit and the strength of its international unit.
BBVA said credit demand in its home
markets remained subdued – Iberia contributed almost half of group
profits – despite a small rise (4%) in year-on-year lending.
Increasing
activity
In Germany, Deutsche Bank enjoyed a strong half with profits
before tax up by more than 37%. Notably, Deutsche’s private and
business client unit in the second quarter delivered “the best
quarterly result since the peak of the financial crisis”, according
to chairman Josef Ackermann.
In an upbeat statement, Ackermann
said: “Global economic activity is likely to strengthen and the new
regulatory framework is finally taking shape”.
ING’s first half pre-tax profits
fell, but a strong second-quarter performance produced results well
ahead of analyst expectations. In common with a number of its
peers, retail strength at ING more than offset weakening profits
from its investment banking unit.
In the Nordic region, the biggest
bank by assets, Danske, posted what it termed “satisfactory”
results, with profits before tax up by 32%. Danske said its
full-year profits target was achievable, despite rising bad loans
and losses within its insurance unit.
Lending within Danske’s Danish unit
was up 7% year-on-year but an increasingly competitive market for
deposits, resulted in an increase of only 1%.
One of the biggest turnarounds in
Europe in the first half was witnessed at Lloyds Banking Group: it
turned a loss of £4bn in fiscal 2009 into pre-tax profits of
£1.57bn.
Positive
performance
In particular, Lloyds’ UK retail unit increased pre-tax profits
from £360m a year ago to £2.49bn in the first half.
First half retail highlights at
Lloyds included the opening of 880,000 current accounts and 2.6m
new savings accounts
Group wide, bad loan charges more
than halved to £6.6bn while its net interest margin improved by 38
basis points to 2.08%.
Lloyds reported that it was ahead
of schedule in integrating Halifax Bank of Scotland into the group,
and said it was on track to deliver £2bn of synergy savings by the
end of 2011.
Less positive was the failure of
Erste Bank, the third-biggest lender in Central and Eastern Europe,
to match analyst forecasts. First half pre-tax profits were flat at
€764m, with second quarter net profits down by 17% due to
provisions for losses in Eastern Europe.
Erste was however able to report a
sharp fall in its cost-income ratio, down by 370 basis points from
a year ago to 48.8%; it also reported record operating income, up
by 4.1% to €3.89bn.
Looking ahead to the end of the current fiscal year, Erste
echoed SocGen’s – and others caution – and said it did not expect
any fall in loan provisions for 2010 compared to last year.
