Saturday 21 October 2017

Troubled bank increases exposure here by $2.6bn to $8.3bn

Donal O'Donovan

Donal O'Donovan

HSBC dramatically increased its exposure to Ireland and Irish banks and slashed investments in Spain and Greece in the first half of this year, the bank revealed yesterday.

The troubled global bank said its exposure to Ireland increased by $2.6bn (€2bn) to $8.3bn to the end of June. The bank also boosted its exposure to Portugal over the same period but slashed its investment in Spain and Greece.

With Spain increasingly the focus of euro-area concerns, HSBC said its exposure to the Spanish sovereign and related agencies fell by $900m to $1.3bn at the end of June.

Overall exposure to Greece was cut by $2.4bn to $5.2bn, HSBC said in the statement, exposure to the Greek sovereign dropped $300m to $100m.

HSBC yesterday reported a pre-tax profit of $12.7bn for the first six months of this year, up 11pc compared to the same period in 2011.

Its investment bank's profit rose 5pc on the year to $5bn, faring better than rivals in a tough market where activity has been hit by the eurozone crisis. Costs represented 57.5pc of income, similar to the past year and above chief executive Stuart Gulliver's 52pc target

Mr Gulliver is midway through a deep overhaul to cut costs, sell or shrink unprofitable businesses, and to direct investment to faster growing Asian markets.

It has cut 27,000 jobs since the start of 2011 and sold or closed 26 business in that time, including sales of its US credit card businesses and half its US branches.

Scrutiny

HSBC, which was formed in 1865 and operates in 84 countries, said a new streamlined and centralised structure set up by Mr Gulliver has simplified the bank and made it easier to monitor and enforce standards and compliance.

But it also set aside $1bn to compensate British customers for mis-selling them loan insurance, and $237m to cover payouts to small UK businesses wrongly sold complex hedging products.

HSBC is also one of more than a dozen banks under scrutiny in a global interest rate-rigging scandal that has rocked the sector and further damaged the reputation of bankers.

"It's very unfortunate and deeply concerning that even the banks considered more secure such as HSBC are so seriously at risk," a large investor in HSBC said. "And the news is still coming out -- we have yet to see the impact, if any, of the Libor investigation and HSBC's role in that. It's hard to see how much more bad news the markets can take," said the investor, who asked not to be named.

Mr Gulliver said that as a contributor to Libor and its eurozone equivalent Euribor, HSBC was co-operating with regulators, but it was too early to say what the outcome would be or to estimate the potential cost for the bank.

Irish Independent

Also in Business