HSBC profits roar ahead 16% as margins widen

The boom in banking earnings continued yesterday as HSBC, the UK-based global banking giant which owns Midland, saw generous margins power pre- tax profits to pounds 3.7bn, up 16 per cent on 1994. "We are firing well on all fronts," said John Bond, HSBC's chief executive.

The strong performance, echoing bumper profits already reported from Lloyd's and NatWest Group, highlighted the best year banks can remember for a long time. In particular, generous interest margins during 1995, combined with bad debt provisions at all-time lows, pushed earnings to high levels. "You would have to go back decades rather than years to find the banks enjoying in real terms this sort of high profitability," said Chris Ellerton, analyst at SBC Warburg.

HSBC benefited from its international geographical spread, which sets it apart from the other large UK retail banks, as net interest margins in all its three main lending areas, Hong Kong, Britain and the US, strengthened profits. ``They have seen a very good improvement in the quality of profits, with underlying earnings not that volatile," said Hugh Pye, analyst at BZW.

But the group stressed it still faces a big challenge in getting costs down at Midland, where job cuts are expected to continue. Midland had a cost/income ratio of 67 per cent last year, down from 70 per cent in 1994. The aim, which is similar to that of its rival NatWest, is to get this down to around 60 per cent. "We are working towards that end relentlessly," said Mr Bond. "Unquestionably there will be fewer people in bank jobs, but we are not planning anything draconian."

The Banking Insurance and Finance Union yesterday said Barclays, which reports its results today, is planning a huge new wave of job losses despite expected profits of pounds 2bn. BIFU said older workers, including staff in their forties, were being targeted. More than 17,000 jobs have been axed since the end of 1991, largely as a result of new technology.

Midland said its cost performance last year was hampered by large one- off charges, pounds 76m for redundancies and pounds 34m for vacant space, which were more than double their 1994 levels. Midland also saw a massive 102 per cent increase in its charge for bad and doubtful debts to 198m. HSBC refused any comment on the details of this increase, but analysts believe it reflected a large specific provision against its exposure to Eurotunnel. Along with NatWest, which also announced an unspecified but large special provision in its results last week, HSBC is the other large UK lender to the troubled cross-channel operation.

Overall, Midland's 1995 pre-tax profit was up 10 per cent at pounds 998m. Operating profit before provisions was up 21 per cent to pounds 1.2bn, which Mr Bond said reflected the improvement being made in restructuring Midland. "There are a considerable amount of investments in the future of Midland's numbers," he said, adding that the modest rise of just 3 per cent in the bank's attributable profit did not tell the whole story. But speaking in Hong Kong, Sir William Purves, HSBC's group chairman, said: "Of course I am not happy with 3 per cent and I don't think our shareholders would be either."

A noticeable area of weakness continues to be investment banking where the attributable profits was 19 per cent lower, at pounds 171m than in 1994. The main reason was lower volumes in James Capel's equity markets, but analysts said the group continues to suffer from a lack of focus. HSBC recently announced plans to integrate its investment banking businesses. Mr Bond also said HSBC is interested in boosting its fund management business through acquisition.

HSBC shares closed down 16p at 1056p in a weak London market.

Suggested Topics
News
Andy Murray with his girlfriend of nine years, Kim Sears who he has got engaged to
people

Tennis star is set to marry his long-term girlfriend, Kim Sears

News
people
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film Ridley Scott reveals truth behind casting decisions of Exodus
News
people
PROMOTED VIDEO
Sport
footballArsenal 2 Borussia Dortmund 0: And they can still top the group
Arts and Entertainment
An unseen image of Kurt Cobain at home featured in the film 'Kurt Cobain: Montage of Heck'
filmThe singers widow and former bandmates have approved project
News
Andy Murray with his girlfriend of nine years, Kim Sears who he has got engaged to
peopleWimbledon champion announces engagement to girlfriend Kim Sears
Arts and Entertainment
Jake Quickenden and Edwina Currie are joining the I'm A Celebrity...Get Me Out Of Here! camp
tv
Arts and Entertainment
George Mpanga has been shortlisted for the Critics’ Choice prize
music
News
Albert Camus (left) and Jean-Paul Sartre fell out in 1952 and did not speak again before Camus’s death
people
Arts and Entertainment
Roisin, James and Sanjay in the boardroom
tvReview: This week's failing project manager had to go
News
ebooksNow available in paperback
News
Ed Miliband visiting the Holocaust museum in Jerusalem. The Labour leader has spoken more openly of his heritage recently
newsAttacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But are the barbs more sinister?
Arts and Entertainment
'Felfie' (2014) by Alison Jackson
photographyNew exhibition shows how female creatives are changing the way women are portrayed in advertising
News
i100
Life and Style
Fright night: the board game dates back to at least 1890
life
Environment
The vaquita is being killed by fishermen trying to catch the totoaba fish, which is prized in China
environmentJust 97 of the 'world's cutest' sea mammals remain
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Langley James : IT Support; Helpdesk, VMware; Manchester, £18k

£16000 - £18000 per annum: Langley James : IT Support; Helpdesk, VMware; Manch...

h2 Recruit Ltd: Business Development Manager - HRO - £70k+ ote

£35000 - £450000 per annum + £3k car, £70k ote: h2 Recruit Ltd: Do you want to...

Citifocus Ltd: Newly Qualified Accountants - Risk Mgmt

£Attractive Package: Citifocus Ltd: Prestigious financial institution seeks to...

Citifocus Ltd: Operational Risk Analyst

£Negotiable: Citifocus Ltd: Experienced operational risk professional with ban...

Day In a Page

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game
There's a Good Girl exhibition: How female creatives are changing the way women are portrayed in advertising

In pictures: There's a Good Girl exhibition

The new exhibition reveals how female creatives are changing the way women are portrayed in advertising
UK firm Biscuiteers is giving cookies a makeover - from advent calendars to doll's houses

UK firm Biscuiteers is giving cookies a makeover

It worked with cupcakes, doughnuts and macarons so no wonder someone decided to revamp the humble biscuit
Can SkySaga capture the Minecraft magic?

Can SkySaga capture the Minecraft magic?

It's no surprise that the building game born in Sweden in 2009 and now played by millions, has imitators keen to construct their own mega money-spinner
The King's School is way ahead of the pack when it comes to using the latest classroom technology

Staying connected: The King's School

The school in Cambridgeshire is ahead of the pack when it comes to using the latest classroom technology. Richard Garner discovers how teachers and pupils stay connected
Christmas 2014: 23 best women's perfumes

Festively fragrant: the best women's perfumes

Give a loved one a luxe fragrance this year or treat yourself to a sensual pick-me-up
Arsenal vs Borussia Dortmund: Alex Oxlade-Chamberlain celebrates century with trademark display of speed and intuition

Arsenal vs Borussia Dortmund

The Ox celebrates century with trademark display of speed and intuition
Billy Joe Saunders vs Chris Eubank Jnr: When two worlds collide

When two worlds collide

Traveller Billy Joe Saunders did not have a pampered public-school upbringing - unlike Saturday’s opponent Chris Eubank Jnr
Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

Our partner charities help veterans on the brink – and get them back on their feet
Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

Putin’s far-right ambition

Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

Escape to Moominland

What was the inspiration for Finland's most famous family?