HSBC investment bank boosted by higher shares as deals collapse

Profits at HSBC’s global markets and banking unit rose 37% in the second quarter as trading income rose, but trading fees more than halved in the period.

The UK lender made a profit of $1.7 billion for its GBM division, which houses its investment bank and trading functions, up 37% on the same period last year.

Trading revenue rose 20% to $2.3 billion in the second quarter, boosted by a rise in commissions from its forex traders. The UK lender has been reducing risk-weighted assets from its trading functions in recent years after unveiling a sweeping overhaul of its business in 2020 that will see 35,000 jobs go.

Meanwhile, it has been investing in dealmakers to bolster its investment bank and get a bigger share of M&A work. However, HSBC brought in $153 million from trading fees in the second quarter, about half of the comparable period last year.

Hiring has cooled rapidly after a record $130 billion in the industry last year, with Wall Street banks including JPMorgan and Morgan Stanley disclosing sharp declines in investment banking fees during the second quarter, which were followed by large declines in their European rivals.

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Overall, HSBC made pre-tax profit of $5 billion, down slightly from the second quarter of 2021 but ahead of analysts’ expectations of $4.9 billion.

The bank also pledged to restore its quarterly dividend next year, which will help satisfy its large Hong Kong retail investor base. In April, it emerged that HSBC’s biggest shareholder, Chinese insurance group Ping An, was pushing for the UK lender to spin off its Asian unit in a move it claimed would boost growth. In the first half of this year, HSBC made $6.3 billion in profit in Asia, which is about 70% of the global total.

“Our first-half performance reflects the continued impact of our strategy, with revenue momentum gathering and tight cost control,” HSBC chief executive Noel Quinn said in a statement. “The progress we have made in growing and transforming HSBC means we are in a strong position as we enter the current rates cycle.”

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In Europe, HSBC’s global banking and markets unit made a profit of $306 million, compared with a loss of $68 million in the second quarter last year. While the bank does not break out how much it spends on salary, expenses at its European investment bank fell by about $300 million in the comparable period in 2021.

To contact the author of this story with comments or news, please email Paul Clarke


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About the Author: Chaz Cutler

My name is Chasity. I love to follow the stock market and financial news!