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February 28, 2011updated 04 Apr 2017 1:08pm

HSBC’s retail unit returns to profit

HSBC has posted a profit before tax of $19.04bn for the 12 months to 31 December, more than double its profit for the previous year (2009: $7.08bn).

By Douglas Blakey

HSBC has posted a profit before tax of $19.04bn for the 12 months to 31 December, more than double its profit for the previous year (2009: $7.08bn).

For the first time since 2006, HSBC was profitable in every business unit and region, including its previously troubled US retail division.

Having lost $7.74bn in 2009, HSBC’s US arm posted a profit before tax of $454m.

But at group level, HSBC’s profits do not yet match pre-crisis earnings; in 2006 and 2007 it posted pre-tax profits of $22.1bn and $24.2bn respectively.

HSBC’s retail focused Personal Financial Services unit returned to the black and posted a profit before tax of £3.52bn; in fiscal 2009 the division lost $2.06bn.

Modest profits growth at HSBC’s European unit (an increase of 7.3% year-on-year to $4.30bn) was dwarfed by double digit profit growth elsewhere.

In Hong Kong, HSBC’s profits before tax rose by 13.1% to $5.69bn; in the rest of the Asia Pacific region, profits rose by over 40% to $5.90bn. At the bank’s Latin America and Middle East business units, profits rose by 60% and 96% respectively.

At group level, total loans increased by 7% to $958m while deposits increased by 6% to $1.2trn.

HSBC highlights in fiscal 2010 included a near halving of loan loss provision to $15.1bn from $27.4bn in 2009.

Less positive was a 3.2 percentage point increase in HSBC’s cost-income ratio from 52% to 55.2%.

Operating expenses of $37.69bn represented a sharp increase of almost 10%.

Analysts were also lukewarm regarding a 3.2% decline in net interest income in 2010.

Margin pressure contributed to a 4.9% decline in profits before tax at HSBC’s Private Banking unit: $1.05bn in 2010 compared with $1.11bn the previous year. Client assets at the division increased by 6.3% to $390bn.

HSBC retail highlights in 2010 included:

  • HSBC Premier:  the bank’s flagship mass-affluent product; customer numbers grew by a net 980,000 clients, to 4.4m;
  • The launch of the HSBC Advance, aimed at prospective mass-affluent clients; at year-end, Advance had a customer base of 4.6m, across 46 markets.
  • UK retail profits before tax more than trebled, to $1.22bn from $364m the previous year;

HSBC ended fiscal 2010 as the largest UK-headquartered bank ranked by assets, overtaking Royal Bank of Scotland (RBS) and Barclays in the process.

In 2010, HSBC’s total assets increased by 3.8% to $2.46trn, marginally ahead of Barclays’ total assets of $2.42trn.

RBS’ total assets declined by 4.5% year-on-year to $2.35trn.

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