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European Bank results season: HSBC, Barclays, SCB and then there were none

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Despite Bob Diamond and because it is paying $1.6 billion for mis-selling mortgage insurance (PPI, APS) in its 2011 Q1 to Q4, Barclays is the least likely of these three and deserving the worst performing peer that still manages significant international businesses. While HSBC reported 60% lower profits in NA and 65% lower in Europe, StanChart’s prospects seem the brightest of the three as it continues to be even better invested in India and Asia than HSBC as possible ( not possible in China where HSBC and Citi continue to perform)

Though HSBC has shifted its HQ to HongKong, for the Brits its just a tax haven kind of thing and they continue to ask even HSBC to egt rid of profit making businesses in Asia. Thankfully, that is unlikely to happen as HSBC has been running under its own steam and despite provisions of $400 mln and PPI provisions of $440 million, it reported higher PAT of $4 billion in May, just yesterday. For the complete 2011, HSBC might even report a better performance on EBIT than 2010 though the much publicised “Gulliver’s Travails” statement from the management would have us believe differently

For both Barclays and HSBC bad debt charges dropped by $700mln and $1.4 billion respectively where Barclays still ended up with10% lower earnings having reported lower quarterly revenue down 8% yoy to $11.84 billion while HSBC reported $4.15 bln in net profits on Asia and the Middle East, even Latam as it wound down in Russia and reported revenues down 5% yoy to $17 billion. HSBC is struggling to win over the US consumer markets or the WSJ would have you believe that, right behind Deutsche Bank which is now looking for Corp Credit customers across the pond to rebuild in that market.

Barclays meanwhile is turning a clean profit after Lehman’s trustees conceded a further payment of $1.1 bln to the bank for Spring cleaning the Trillions in Lehman assets where in fact Barclays expects another couple of billion to come. These  came after the results statements on Monday. Standard Chartered reports later this week ( when it does and we see the financial statements we will bring you the case in its entirety again)

Barclays maintains a 83% credit Deposit ratio ( 119% Loans to Deposits) and continues a 20X leverage with Tier I ratio not so strong but getting there at 11%. Barclays profits of $2 billion would be pared down as it has made higher PPI provisions of $1.6 bln compared to HSBC’s $440 mln  Charges took HSBC’s Cost income ratio to above 60% and even without one time charges for PPI settlements ended up 500 bp higher at 55%. the Bank has converted 3/4ths of its bonuses into deferred comp but mentioned that Barclays and HSBC would continue to present them in the quarter where such comp was awarded. HSBC’s profits include $600 mln from associates where its US based associates report tomorrow to the SEC. HSBC’s ROE has improved to 11% while Barclays manages at 7.5p per share Apart from provisions there seem to be staffing costs increases also in its Operating expenses of $10.4 billion

The Wednesday Update: SCB or StanC or StanChart whichever be your favorite term, is the other global bank pursuing Asia and Africa and growing thru the crisis without sub prime fallouts necessitating a capital drawal from the Treasury. It raised $10 billion in Capital  in the last two years in global markets while it now aims to raise $5 bln from a rights offer. Business for StanChart has grown in double digits year on year from the cursory management statement published by the bank. It also seems they are suffering from the bite of the Cost income Ratio spike.

Gulliver, Stuart in the meantime has planned cost reductions of upto $3.5 bln in the next 3 years as he is clarifying tonight at the Canary Wharf HQ, esp targeting the retail bank. Also the $25 bln sale planned in the US has turned out to be the $33 bln Cards business and correspondingly it might be looking for purchases and expansion in Mexico and Brazil

Where are the savings for HSBC?

In a very interesting Beyond Brics update of the Gulliver’s Travails presentation HSBC redefines what is not working in some EMs but most of the cost cutting will be on home turf in the UK retail and France, Turkey and Germany. Nowonder when most of the business lost has been in the europe geographies apart from the ever bleeding Credit cards portfolio in the US consumption economy.


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