HSBC and BNP trump forecasts on earnings
HSBC and BNP Paribas, two of Europe's three biggest banks, trumped earnings forecasts after bad debts fell sharply.
The better-than-expected results raised hopes about the future of the banking sector as major lenders prepare to release earnings this week, including Allied Irish Banks, Lloyds, Societe Generale, Barclays and Royal Bank of Scotland.
BNP declined to comment on its interest in AIB's controlling stake in Poland's Bank Zachodni.
Shares in most lenders climbed yesterday following the results from HSBC, Europe's biggest bank, and BNP, the third biggest.
Half-year profits for HSBC hit £6.9bn (€8.3bn), more than double the £3bn of a year ago and above the average forecast of £5.7bn.
Loan impairment charges and other credit risk provisions fell to £4.7bn, down £4bn from a year ago to the lowest level since the start of the financial crisis -- a trend HSBC expects to remain as both personal and corporate balance sheets strengthen.
"I would expect that trend to continue. We have not seen indications we are going to have a double dip," said Sandy Flockhart, chairman of personal and commercial banking and insurance.
France's BNP said net profit rose 31pc to €2.1bn in the second quarter. For the first half, profit rose 39pc to €4.4bn.
The rise was also thanks to lower loan provisions and strong retail banking, offsetting volatile financial market conditions that hit investment banking.
Its second-quarter provisions halved to €1.1bn, the lowest in two years.
"HSBC and BNP have seen provisions cut in half year on year. We are very rapidly seeing big retail banks like BNP and HSBC return to a level of provisions that is very close to what it was before the crisis," said Francois Chaulet, fund manager at Montsegur Finance Asset Management in Paris.
BNP said it reflected an improving but still challenging macro-economic environment in its key eurozone markets.
That provided opportunity for BNP, which bought assets from crippled Benelux bank Fortis at the peak of the crisis, to grab market share, chief executive Baudouin Prot said.
Mr Prot said BNP did "not need" acquisitions to grow and that the bank had achieved critical mass with the Fortis deal.
HSBC chief executive Michael Geoghegan, who hails from Ireland, said that he remained alert to acquisition opportunities and did not rule out further buys.
Growth could remain anaemic in western countries, HSBC warned, although it was bullish on the prospects for emerging markets, even if "some cooling off" in China's economy was possible.
HSBC's London-listed shares were up 5pc and BNP's shares were up 4.7pc in late trading, helping to lift the European bank sector 3.5pc.
Mr Chaulet said the results backed up a positive recent sentiment on banks after a health check of the European banking system and a relaxation of proposed capital rules.
Investment banking at both HSBC and BNP slipped in the second quarter, after the euro-zone debt crisis slowed capital markets activity and also hurt rivals including Goldman Sachs and Deutsche Bank.