HSBC Private Bank reported positive gains in
profit before tax, net new money and assets under management in the
past six months but climbing costs and exposure to Madoff-related
claims dampened the results.
Profit before tax was $552m, marginally lower
than in the first half of 2010, but up 11% compared to 31 December
2010.
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Strong revenue growth, driven by increases in
client assets under management and activity levels, were offset by
a rise in costs and impairment charges.
Cost-income continues its
rise
These rising costs drove up its cost-income
ratio to 66%, up from 62%, since 31 December 2010, although HSBC’s
ratio is healthy when compared to some of its rivals.
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By GlobalDataLike many other private banks, HSBC said the
strengthening of the Swiss franc was one of the reasons operating
expenses had increased.
Higher costs incurred as a result of the
developing regulatory environment, the hiring of front office staff
to cover faster growing markets and an acceleration in the expense
recognition for deferred bonus awards were also cited.
Reported client assets increased 7% in the
past six months to $416bn driven by $13bn of net new money inflows,
together with favourable foreign exchange and market movements.
Madoff claims ‘could be
significant’
HSBC also acknowledged the claims brought
against the private bank and other HSBC businesses by Fairfield
Sentry Limited and Fairfield Sigma Limited “could be
significant”.
The bank said although the case was in its
early stages, it was not practicable
at this time for HSBC to estimate reliably the
aggregate liabilities, or ranges of liabilities.
“In any event, HSBC considers that it has good
defences to these claims and will continue to defend them
vigorously,” the bank said in its interim report.
The results made no mention of the private
bank’s decision to discontinue wealth management services to US
resident private clients from locations outside the United
States.
