BANKING giant HSBC will continue to convince investors that “boring is good” when it posts half-year results tomorrow.
Emerging markets growth, the housing market recovery in the United States and the UK and the improving global economy should help the lender build on a 34 per cent year-on-year rise in first-quarter underlying profits.
HSBC, the last of the major high street banks to report on first-half trading, said first-quarter profits hit $7.6 billion (£4.9bn) from $5.7bn.
Falling charges for soured loans and compensation helped drive the profits rise, while chief executive Stuart Gulliver said the industry was moving into “calmer waters” in the wake of the credit crunch and the payment protection insurance (PPI) mis-selling scandal.
Rivals recently announced big rises in PPI provisions, with Lloyds Banking Group putting aside a further £450 million to take its total bill to £7.3bn, with Barclays’ £1.35bn to cover PPI claims lifting its bill to £4bn.
HSBC has so far set aside £1.6bn for mis-sold PPI, but analysts at Nomura believe it is the “best-provisioned” bank and will not need to add to its compensation pot.
Shrinking costs have helped the bank improve earnings, including selling or closing more than 50 businesses. Worldwide, the bank has lost about 40,000 of its 300,000 employees as a result of restructuring and sell-offs since Gulliver took over at the start of 2011.
Analysts at Nomura said: “Boring is good and HSBC remains our top pick amongst the UK banks. In the current uncertain macro-political environment, we see HSBC as a stock for all climates.”
Shore Capital analysts see HBSC reporting first-half pre-tax profits of $14.5bn, up 14 per cent year-on-year.
Shore banking analyst Gary Greenwood, who has a “buy” stance on the stock, said returns should improve now the bulk of its restructuring has been completed.