HSBC loan book comes under City spotlight

Analysts will be casting a close eye over HSBC’s loan book this week for any signs of growth as Britain’s biggest bank updates on third-quarter trading.

HSBC is the largest listed bank in the UK though much of its business is centred in Asia. Picture: Kirsty O'Connor/PA Wire

Deposits have jumped recently, as customers have sought the safety of cash, but an increase in loans could signal a return of consumer and business confidence.

However, there will be concerns over the potential for loans to turn sour as the economic fallout from coronavirus intensifies.

Russ Mould, investment director at AJ Bell, said the City would be looking carefully at a number of key areas at the bank, which is heavily reliant on the Asian market.

He noted that HSBC’s shares were trading no higher now than they were back in 1994, just a couple of years after the acquisition of Midland Bank, as a result of the pandemic, recessionary fears, falling interest rates and tensions in Hong Kong.

Mould noted: “The good news at least is that analysts do believe the third-quarter of 2020 overall will not be as bad as the second.

“The current consensus forecast, according to HSBC’s own website, is looking for a pre-tax profit (on a stated basis) of $2.1 billion [£1.6bn), up from $1.1bn in [the second quarter].

“That would still, however, be less than half of what the bank made a year ago and there are two main reasons for this, both of which will be carefully studied by analysts. The first is write-downs of loans that have either gone sour or may be about to. The second is the lending margin on the loan book.”

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