HSBC see’s sharp jump in profits due to US asset sales

3rd August 2012

Provided by City Index 

Banking giant HSBC has reported a significant rise in profits due to the sale of some of its assets in the United States. In the first six months of 2012, the banking chain which has branches worldwide, saw pre-tax profits rise by 11% from $11.5bn to a staggering $12.7bn, largely due to the sale of US-based assets for a combined total of $4.3bn. Among the assets sold are 138 branches of the bank, as well as the sale of its Card and Retail Services business.

The sale has given HSBC capital to make provisions for mis-selling PPI insurance and money laundering in the wake of compensation claims from customers in the UK and fines it faces in the US.

HSBC is facing claims for compensation from angry customers who were apparently mis-sold payment protection insurance (PPI) and sales of specialist interest rate protection products to businesses. At the same time, US regulators are expected to hand the bank a multi-million dollar fine for being open to money laundered worldwide. They have set aside $1.3bn for angry customers, while $700m has been set aside for any fines given. This move has been made by HSBC in order to improve customer relations, which are fractious at this moment in time.

Although HSBC isn't the only bank experiencing problems, in the wake of the Libor scandal which has engulfed Barclays, they may yet have to pay more in the way of fines, although they said they were co-operating with banking regulators in the UK.  However, the increase in profit will give investors some confidence.

In reaction to the earnings from HSBC, Joshua Raymond, Chief Market Strategist at Spread Betting, CFD and Forex trading firm City Index said, "Despite the additional provisions taken for PPI claims and the money laundering scandal, HSBC's results were better than expected and that's the key point for shareholders. The fact of the matter is not many banks are outperforming at the moment and so it's no surprise HSBC's shares rallied as a result of their earnings."

Leave a Reply

Your email address will not be published. Required fields are marked *