Indeed, these results continue to suggest that HSBC was unlikely to have shifted its domicile from Hong Kong to London had it not been for the impending Chinese takeover of the Crown colony next July. Hong Kong remains the power house of the group, with profits there rising 9 per cent to pounds 1.59bn. Net interest margins there, up from 2.62 per cent to 2.88 per cent, are the fattest of any of HSBC's worldwide operations and interest income levels, up 16 per cent, are rising as fast as in the rest of Asia Pacific and more than twice the rate of 7 per cent seen in the UK.
But while Hong Kong powers on, the figures from elsewhere have gone a long way to dispel last year's notion that HSBC is a spent force. The US business grouped around Marine Midland has recovered strongly, doubling profits to pounds 359m last year. Management has clearly got to grips with the problems there, with a big reduction in the non-performing assets at the problem Concord Leasing operation and a 13 per cent drop in expenses.
At home, Midland Bank's 10 per cent increase in profits to pounds 998m was flattered by securities trading losses in 1994. However, HSBC is not sitting on its hands. Although the cost to income ratio tumbled from 70.1 per cent to 67.3 per cent, it remains high by the standards of its peers and the aim is to get it down to 60 per cent over three years.
The overall picture is of both volumes and margins continuing to advance, while the loan book improves in quality. Non-performing loans fell by a quarter and although bad debt charges were higher in the year, much of this was due to a prudential exercise in raising the general provision in the UK.
The economic case for HSBC continues to be strong. Corporate earnings are expected to accelerate in Hong Kong for another two years, the US is picking up again and the outlook for the UK is quite reasonable. The problems all arise on the political front.
Of these, Hong Kong plainly looms the largest. Nobody can tell what the Chinese will do, but the Bank of China is set to be a formidable competitor to HSBC in the colony. Meanwhile, in the UK, the banks will be a prime target for any windfall tax imposed by a future Labour government.
Assuming profits hit Morgan Stanley's forecast of pounds 4.1bn this year, the shares, down 16p at pounds 10.56, look reasonable value on trading grounds on a prospective multiple of 10. But the risks remain.