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HSBC First Half 2001 Net Profit US$3.2-3.9 Billion
HSBC Holdings PLC is expected to report Monday a six months to June net profit of US$3.2 billion to US$3.9 billion, Hong Kong analysts said.
Higher provisioning and goodwill charges were dampening contributions from subsidiary companies, they said.
The banking giant reported a net profit of US$3.5 billion a year earlier.
Net interest income was expected to be strong although the company's bottomline would be affected by the goodwill amortisation from the purchase of Credit Commercial de France (CCF) last year.
Higher provisioning amid weak loan demand and margin deterioration in Hong Kong would also dampen a full earnings contribution from CCF, they said.
BNP Paribas Peregrine Securities banking analyst Patrick Ho saw net profit falling 1.3 percent to US$3.48 billion in the first half.
Net interest income would be a strong US$7.27 billion, given the full earnings contribution from CCF, while non-interest income was seen at US$6.15 billion.
Despite the contributions from CCF, operating expenses and interest costs from the acquisition may adversely affect the company's net profit, Ho said.
Total provisions could rise to US$760 million from US$368 million. A slowing US economy meant North America would see the largest increase, while Europe would account for most of the provisions in terms of value.
Weak loan demand and margin deterioration in Hong Kong, coupled with lower demand for investment related products given concerns about the local economy, would also depress earnings.
Brokerage commissions would be lower, reflecting the difficult market environment.
However, HSBC's insurance operations were expected to perform well, with falling interest rates boosting returns, while the company should also be able to realise US$150 million in capital gains from the sale of some equity investments.
Latin America would remain a concern for some time, while the possibility of a US economic recovery in the fourth quarter remained unclear, Ho said.
ABN Amro Asia head of banking research, Robin Hammond, saw earnings per share (EPS) rising 1.0 percent in the first half of 2001.
"Europe is still looking reasonably good and we are still seeing a bit of growth coming out of North America," he said.
Cost benefits would be seen coming through in the first half, even allowing for higher provisioning in North America, Hammond said, adding provisions would rise 40 percent.
Credit Suisse First Boston (CSFB) forecast a net profit of US$3.2 billion, with net interest income at 7.2 billion and non-interest income at US$5.8 billion.
In a research report, CSFB said interim results could surprise the market and the stock could rally up to 100 Hong Kong dollars on the territory's key Hang Seng index.
CCF's full six months contribution, coupled with the group's very liquid balance sheet, should offer some defence against the global slowdown in capital markets, it said.
However, the research house said HSBC could post the weakest EPS performance among Hong Kong banks, falling 16.2 percent year-on-year.
At the same time, CSFB said concerns remained about increased risk in emerging markets and Latin America, the uncertain prospects for the global economy and the impact on the UK market of the failed Lloyds/Abbey National deal.
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