HSBC books $19b despite writedowns
Updated: 2008-03-04 07:00
By Kwong Man-ki and Hui Ching-hoo(HK Edition)
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HSBC Asia spokesman David Hall (left) confers with HSBC Asia-Pacific Chairman Vincent Cheng (center) and CEO Sandy Flockhart during yesterday's meeting announcing the bank's 2007 annual results. Edmond Tang |
HSBC Holdings posted a 21 percent increase in its 2007 earnings, bringing in $19.1 billion despite a huge writedown of $17.2 billion.
Thriving Asia-Pacific markets and special gains helped offset the bank's sluggish business in the United States. HSBC trades its shares in both London and Hong Kong.
Hong Kong operations played an important role in the gains, as pre-tax profits there rose 42 percent to $7.3 billion and contributed 30.3 percent to the total pre-tax profits, up from 23.5 percent in 2006.
Asia-Pacific and Middle East markets contributed 55.1 percent of the group's pre-tax profits.
The bank's mainland operations also did well, with pre-tax profits leaping from $708 million in 2006 to a record high of $2.4 billion.
Stephen Green, chairman of the group, called the mainland earnings remarkable. "The mainland economy was so strong last year," he said. "Developing the market will be our main strategy, but the economy may slow down somewhat" this year.
However, the deteriorating US market continues to eat into the group's profits, and the $17.2 billion writedown has surpassed estimates. The bank's North America writedowns rose 79 percent to $12.2 billion.
"The economic slowdown and the credit outlook in the US may well get worse before they get better," Green said.
However, HSBC's dividend payout policy is still aggressive, with its fourth-quarter dividends surging 8.3 percent to 39 cents. The total dividends in 2007 rose 11.1 percent to 90 cents.
But First Shanghai Securities Strategist Linus Yip doubted that result has painted a clear picture of the impact of the US credit crunch on HSBC.
"The climate of the global economy has sharply deteriorated over the past two to three months," Yip said.
"We don't believe the worst is over, and the bank might further write down its subprime-linked investments in North America.
"Also, although the bank booked considerable profits for its mainland investments in banks such as Bank of Communications, it is questionable whether the A-share market and mainland economy can remain robust this year."
Focus on Asia-Pacific
HSBC announced yesterday it will add two more Asia-Pacific senior executives to its board, showing that the bank will focus on Asia-Pacific markets.
The bank added its Asia head, Sandy Flockhart, and Investment Banking Chief Stuart Gulliver as executive directors on its board beginning May 1.
Earlier, HSBC Asia-Pacific Chairman Vincent Cheng was appointed to be the first Chinese executive director of HSBC.
Cheng said: "The appointments reflect the increasing importance of the Asia-Pacific regions".
(HK Edition 03/04/2008 page2)