HONG KONG • HSBC Holdings beat expectations with a 10 per cent rise in first-half profit that was driven by a strong performance in Hong Kong, and said yesterday that it had agreed to the sale of its unprofitable Brazilian unit.
Europe's biggest bank said pre-tax profits in the first six months of the year were US$13.6 billion (S$18.7 billion), up from US$12.3 billion a year ago, and above analysts' average forecast of US$12.5 billion according to a poll conducted by the bank.
Profits were driven by an investing frenzy in Hong Kong among individual customers amid China's soaring markets earlier in the year, the bank said.
HSBC has become increasingly reliant on Hong Kong for profits as its businesses in Europe, the United States and other emerging markets slow, and has said it is considering moving its headquarters back to the former British colony.
The market turmoil in China in recent weeks, however, could mean a gloomier outlook for the second half for HSBC.
The bank noted its performance in July was "satisfactory", but chairman Douglas Flint said the banking environment remained "challenging" and the economic environment was particularly uncertain in China and the euro zone.
"HSBC's wealth management revenues in Hong Kong from equities, mutual funds and asset management increased significantly," Mr Flint said.
Mr Ian Gordon, an analyst at Investec Securities in London, said the bank was not likely to maintain that kind of growth over the next few quarters.
"The bank's profits benefited from the boost from Stock Connect before the market turned, so I wouldn't extrapolate the same level of performance into the third quarter and beyond," he said.
Asia now accounts for two-thirds of HSBC's profits, and chief executive Stuart Gulliver has pinned the lender's fortunes on a "pivot" to the region and its fast-growing economies.
HSBC is speeding up a cull of unprofitable units by cutting almost 50,000 jobs - half of them from selling businesses in Brazil and Turkey.
It is close to selling its loss-making Turkish business to Dutch lender ING Group for around US$700 million to US$750 million, sources have told Reuters.
It said it had agreed to sell Banco Bradesco SA, Brazil's second-biggest private-sector bank, for a higher-than-expected 17.6 billion reais (S$7.1 billion), as it seeks to cut underperforming businesses.
HSBC also said it had increased to US$1.3 billion from US$550 million the sum set aside to cover costs from various regulatory probes into banks' rigging of foreign exchange markets worldwide.
The lender's shares were unchanged in Hong Kong early yesterday afternoon, against a 1 per cent drop in the city's benchmark Hang Seng index. REUTERS