HSBC Misses Expectations as Standard Chartered Outshines with Upgraded Guidance
On.cc · 1 SOURCES1 day ago3 MIN
Summary
HSBC Holdings reported a 32% increase in pre-tax profit, but the figure appears more impressive than it actually is due to a low base effect from Madoff-related litigation provisions of $1.4 billion recorded in the same period last year . After stripping out one-time items and currency impacts, HSBC's adjusted pre-tax profit grew a more modest 10% to $10 billion, falling short of market expectations for upgraded guidance . Meanwhile, Standard Chartered delivered stronger quality growth with operating income up 13% and non-interest income rising 19%, prompting the bank to raise its full-year targets . The analyst notes that investors rewarded one bank for exceeding commitments while penalizing the other for merely meeting them.
Key Points
- HSBC's third-quarter revenue reached $18.6 billion with net interest income near $11.7 billion, while net interest margin held steady at 1.57%
- HSBC's wealth management business generated quarterly revenue of approximately $2.7 billion, remaining essentially flat year-on-year
- Standard Chartered's wealth solutions and global markets income surged 26% and 21% respectively, driven by fees, trading, and client activity
- Standard Chartered achieved a "positive jaws gap" of approximately 5% with revenue growth outpacing cost growth of 9%, while credit impairment fell from $188 million to $90 million
- HSBC maintained its 2024 targets of at least $46 billion in net interest income and return on tangible equity of 17% or above, without raising its guidance
- Standard Chartered upgraded its full-year revenue growth target above the original 5-7% range and raised its return target from above 12% to approximately 14%
- HSBC's CET1 ratio stands at 13.9% with a dividend of $0.10 per share and a share buyback program of up to $1 billion, while trading at a price-to-book ratio of approximately 1.69 times
- Standard Chartered's CET1 ratio is 13.8%, with the analyst recommending holding HSBC for dividends and waiting for pullbacks before accumulating Standard Chartered
Why It Matters
The contrasting performances of these two major Hong Kong-listed banks reflect different growth strategies in the current interest rate environment. HSBC's reliance on net interest income leaves it vulnerable if rates decline, whereas Standard Chartered's diversified fee and trading revenue model offers more resilience. Hong Kong investors holding stakes in either bank should consider these structural differences when reassessing their portfolios, particularly given the risks to deposit costs and commercial real estate highlighted by the analyst.
The contrasting performances of these two major Hong Kong-listed banks reflect different growth strategies in the current interest rate environment. HSBC's reliance on net interest income leaves it vulnerable if rates decline, whereas Standard Chartered's diversified fee and trading revenue model offers more resilience. Hong Kong investors holding stakes in either bank should consider these structural differences when reassessing their portfolios, particularly given the risks to deposit costs and commercial real estate highlighted by the analyst.