HSBC (HBC) Q2 results were better than expected, but the stock fell in London after the British Bank revealed that emerging markets were slowing, that it had put aside more than $10 billion for bad loans, and said that its outlook is “highly challenging with significant uncertainty.“
This continuing evidence of a slowdown in emerging markets is particularly bad news. Multi-nationals are still holding out hope that strength in emerging markets will offset the slowdown in the US and now Europe. It almost certainly won’t.
HSBC put $10.1 billion this year into loan-loss reserves, adding to charges of $17.2 billion in 2007 and $10.6 billion in 2006 for bad loans. While the London-based bank’s profit rose in Europe, Latin America and most of Asia, Chairman Stephen Green said emerging markets will grow “with less momentum” than before.
“There’s some pretty negative news,” said Alan Beaney, investment head at Principal Asset Management Ltd. in Sevenoaks, England, which manages $2 billion including HSBC stock. “Asia is slowing as was to be expected, and the U.S. took a hit.”
HSBC (HBC) posted $7.7 billion in net profit, down from $10.9 billion in the same period a year ago, but beating the consensus estimate of $7.3 billion
HSBC reported a loss in its North American business, and profits fell in Hong Kong as faltering growth in the U.S. “affected” Asian markets. HSBC’s pre-tax loss in North America was $2.9 billion and bad loan charges rose 85% to $6.8 billion. Bloomberg:
Writedowns and credit-related losses in North America exceed $32 billion since the start of 2006, “more than all the profits earned in emerging markets and Hong Kong over the same period,” Knight Vinke Asset Management LLC head Eric Knight said in an e- mailed statement today.
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