Chillin' out till it needs to be funded
HSBC pushed out its results this AM with reporting for the two US companies showing an increase in losses on a much reduced income of
$2 bln after the sale of the credit cards unit. With $1.9 bln in provisions just for the US outstandings, the loss for this quarter wiped out its remaining $1 bln income from Credit cards in the USA Though the bank did creditably growing Profit before Tax ( the only IBIT reported ahead of the analyst conference in the afternoon) to a large $14.4 bln,, the Profit was in fact lower than the nine months ending September 2010 The bank has totted up smaller amoounts in CVA ( “Accounting Gain”) but as for other major banks it’s $4.1 bln in DVA helped it report a 30% growth in IBIT over 2010 for the nine months. the $4.2 bln DVA is also the standalone DVA reported for the quarter Profit before tax reported for Q3 was also grown almost entirely by the $4.2 bln DVA/CVA on its credit book.
The Bank’s RWA shows an overall decrease of $9 bln, affected by $25 bln lost in Forex translation and $16 bln in loan growth in Asia. Trading book however has seemingly reduced though I cannot see any detailed Financials for the period. Concomitantly central bank balances have increased as risk aversion is structured thru products for each geography. NIMs have also compressed as the bank avoids taking more principal risk
Bank facing foreclosure process length issues in the US alongwith having to pay back property taxes for the bad debt According to Stuart that may be given them an additional 1 month in debt provisions as per IFRS
The bank’s quarterly profit was a stable $3 bln down from $3.6 bln last year without the adjustments required for IFRS the banks Cost Income ratio has thus not improved from 54% last year now at 54.6% for Q3. Revenues decreased primarily in the Trading business, in North America and thus the damage to this bank was far lower than expected. Others were mostly teetering on a loss ahead of DVA from CDS and gains on own credit except at Goldman Sachs which did not report a DVA having hedged all its commitments to remove Trading CVA from valuation HSBC USA increased provisions in excess of 65% to $1.8bln and that was absorbed in the final $3 bln reported for profit.