The main reason for the good performance was robust growth in South-east Asia and the withdrawal of hard-pressed Japanese banks from the Hong Kong loan market, which allowed margins to rise. In Hong Kong dollars, dollars 6bn of the dollars 7.7bn pretax profits came from the Asia-Pacific region. But a return to profit at Marine Midland in the US has been a powerful help in generating a 40 per cent pre-tax improvement on a year earlier, in Hong Kong dollars. The link to the US dollar has made the sterling performance less spectacular.
If the group had been merged with Midland Bank at the beginning of the year, it would have made pounds 575m before tax. The Cathay Pacific profit of pounds 215m and a further Midland recovery should ensure pounds 1.2bn or more pre-tax for the full year.
There are potential problems, such as a rising Hong Kong tax rate. Political risk remains in the background. But until there is any evidence of problems the mixture of recovery and Far East growth prospects remains appealing: hard to choose between HSBC and NatWest in the sector.Reuse content