HSBC India income up even as global profit falls

Hong Kong and Shanghai Banking Corp Ltd (HSBC), Europe's biggest bank by assets on Monday said its pre-tax in India increased 10% driven by the performance its global banking unit that serves multinational companies even as its overall business was squeezed by the economic slump.

Profit rose to $561 million in the first half of 2020 from $512 million year earlier, it said.

Global banking and markets’ unit profit climbed 19% as transaction banking, trade finance and capital markets divisions saw brisk business. Profit before tax from this division increased to $313 million from $264 million a year ago.

"Increased adoption of digitisation post lockdown has helped to cater to customer needs during this period. These are largely global customers with increasing footprint in India. Going forward with government reforms and changes in global supply chains making India an attractive destination we are very confident on this business in the medium to long term," said Surendra Rosha, CEO HSBC India.

India is the third largest contributor by geography to HSBC's global pre-tax profit behind Hong Kong ($5 billion) and China ($1.49 billion).

Profits from the bank's corporate centre which houses its treasury business also rose 58% to $160 million from $101 million as bond yields fell during the first six months of the year.

However, profit for both commercial banking which deals with small and medium enterprises and wealth management and personal banking divisions fell. Commercial banking profit dropped 23% to $83 million from $108 million a year ago while

Profit from wealth management and personal banking plummeted 87% to $5 million from $39 million a year ago as the pandemic restricted personal banking activities, Rosha said.

"In commercial banking the spreads have been impacted due to lower interest rates. Also we have increased provisions for future loan losses," Rosha said. HSBC does not give provision numbers with its half yearly results.

Higher provisions also hit the multinational bank's global pre tax profit which fell 65% as it boosted its loan loss provisions to deal with the economic slowdown cause by the Covid 19 pandemic.

Global pre-tax profit for the first six months of 2020 fell by 2/3rds to $4.32 billion, down from $12.41 billion in the same period a year earlier.

In India Rosha expects business to pick up as economic activity improves.

"Our sense is that economic activity will come back. We already are at 75% to 85% of the February levels and as people adjust to the new normal activity will pick up," he said.