Here to stay? HSBC third quarter profits rocket by 32%, causing firm to re-think Asian focus in favor of London

Unlike some of its compatriots which, despite being among the largest of the global financial giants, HSBC Holdings plc (LON:HSBA) raked in the profits in the third quarter. Desite having spent last year as one of the six banks at the center of the regulatory investigation into the rigging of interbank FX benchmarks, costing the […]

Unlike some of its compatriots which, despite being among the largest of the global financial giants, HSBC Holdings plc (LON:HSBA) raked in the profits in the third quarter.

Desite having spent last year as one of the six banks at the center of the regulatory investigation into the rigging of interbank FX benchmarks, costing the company $343 million, followed by an equally expensive class action lawsuit, the company has kept its copybook clean during the third quarter of this financial year, as well as having recorded a massive 32% increase in pre-tax profit.

the company is one of London’s electronic trading stalwarts, handling, along with Citi, Barclays, UBS and JPMorganChase, approximately half of all global interbank FX order flow.

For this particular accounting period, which is the three months between the beginning of July and the end of September, HSBC reported a profit of $6.1 billion, despite a 4% downturn in revenues which can be attributed to the stock market volatility in the Asia Pacific region during that time.

Could HSBC’s regional focus be swayed in favor of London?

HSBC has to weigh up its potential future prosperity according to where it positions its core business with regard to electronic interbank trading.

The company, whose origins are in the Far East despite being regarded as a British bank in the Western hemisphere, has intended to prioritize the Asian market over Britain, Europe and the US, where it had expected to benefit from the vast array of investment-hungry nouveau-riche, especially in Hong Kong and Singapore, which are gateways to China’s huge number of potential clients with a newfound fortune.

Stuart Gulliver, HSBC’s Group CEO stated

“Retail volumes are slow, growth in tourist volumes has slowed, global trade is slowing and Hong Kong is a massive port… there is definitely a mixed picture there.”

He admitted that Hong Kong’s GDP is slowing down due to the knock-on effect of the Chinese stock crisis during the third quarter.

From January until September 2015, the APAC region accounted for two thirds of the bank’s profit despite only employing one third of the bank’s entire payroll.

Barclays plays second fiddle

Rival bank Barclays, which is equal in its standing in London as a major handler of global FX order flow, has not been able to report such an upturn in fortunes, as its third quarter profit dipped by 10%, providing some hard work ahead for newly appointed CEO James Staley.

Last year, Barclays’ financial performance remained in the doldrums whilst lawsuits and regulatory fines hung over its metaphorical head and FX traders hung onto their positions rather than seeking pastures new due to the high remuneration packages offered by Barclays compared to other firms in Canary Wharf and the Square Mile such as RBS or HSBC, however the fear of the axe swinging was never abated during the course of 2014 as Barclays offloaded its Spanish operations, with a view to exiting Europe completely, and talked about making a staggering 19,000 redundancies, with 5,000 being from the investment banking division.

 

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