London: HSBC Holdings PLC said on Monday that it has made a “resilient” start to 2009 and that its revenues have recovered strongly from the last quarter of fiscal 2008 when business was hit hard by the financial crisis.
In its first-quarter trading update, Europe’s biggest bank said its underlying pre-tax profits were “well ahead” of the same period in 2008, largely because of some $6.6 billion worth of gains it made on the valuation of its debts, compared with the $2.5 billion it recorded last year.
However, excluding those debt revaluations, HSBC said profits were lower, but still significantly higher than in the fourth quarter of 2008, as revenue growth was more than offset by higher loan impairment charges and other credit risk provisions.
HSBC’s chief executive Michael Geoghegan said the company’s operating performance in the first quarter was encouraging, boosted by record results from its global banking and markets divisions.
And he said the recent rights issue which raised $17.8 billion means it is well-positioned to “ride out the economic uncertainty ahead, and to take advantage of opportunities to grow.” Unlike other British-based banks, HSBC did not take any government cash to shore up its capital position, opting instead to raise money itself.
HSBC did not give an exact figure for the total it has set aside to cover bad debts, though it did say it was up on the same period last year. Last year, HSBC wrote down around $25 billion worth of assets.
“Loan impairment charges and other credit risk provisions were higher than in Q1 2008, but lower than in Q4 2008 on both an underlying and a reported basis, and in the US were also slightly lower than expected,” HSBC said.
Following the trading update, the company’s share price fell 4% to 555.16 pence ($8.38).
David Buik, markets analyst at BGC Partners, said it was unsurprising that HSBC’s stock fell given its “terrific run” in recent days. Over the last couple of weeks, HSBC’s shares like others in the banking sector have rallied strongly on hopes that they are in a far stronger position than a few months ago.
Despite Monday’s modest share price retracement, he said it’s “hard to argue against the generally held opinion that HSBC is the best run retail bank in the world, by some distance.”