HSBC yesterday said its profit in the Middle East and North Africa rose 8.8 per cent to US$989 million in the first half of this year, up from $909m in the same period last year.
“Our Middle East business continues to perform well, albeit overshadowed by regional uncertainties,” the company said.
Overall profit for the bank was down 12 per cent, however, to $12.3 billion from $14.1bn last year – the company’s first profit decline since 2009. Global revenue fell 9.3 per cent to $31.2bn.
The Mena region accounted for 8 per cent of the company's profits. HSBC has $61.2bn of assets in the region, against $51.6bn in liabilities.
Stuart Gulliver, the company’s chief executive, said strengthening economic growth and rising interest rates in Mena should help bolster revenue next year.
HSBC has left at least 68 businesses since Mr Gulliver took over the UK-based bank in 2011 as it retrenches amid increased regulation and compliance costs.
UK interest rates may rise as early as the fourth quarter, with “positive implications” for revenue, Mr Gulliver said yesterday, as the bank would be able to earn wider margins on its loans and deposits.
“Expect improvement in revenue in 2015,” he said. “You should assume that any improvement would be lagged six months after rates go up.”
HSBC’s shares, which are traded on the London Stock Exchange, gained 1.5 per cent in afternoon trading.
“The UK in particular should maintain a firm recovery,” said Mr Gulliver, with China’s economy expanding at a faster pace this year than previously projected.
HSBC’s pretax profit in Asia fell 15 per cent to $7.89bn, while Europe declined 18 per cent to $2.26bn. Earnings fell 20 per cent in Latin America to $374m.
Bad loan charges and provisions shrank to $1.8bn from $3.1bn as the bank invested in risk and compliance functions, HSBC said.
The bank, which gets the bulk of its profit from Asia, is striving to keep bad loans under control and cut as much as $3bn of costs.
Underlying operating expenses rose 2 per cent to $18.2bn. Costs as a proportion of revenue increased to 58.6 per cent from 53.5 per cent, higher than Mr Gulliver’s “mid-50s” target.
“The headline numbers were a bit weaker than the market expected, which looks to be due to higher-than-expected costs, partly offset by better performance on impairments,” said Gary Greenwood, an analyst at Shore Capital in Liverpool.
HSBC’s common equity Tier 1 ratio, a measure of financial strength, increased to 11.3 per cent from 10.9 per cent at the end of last year.
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