HSBC hits $3bn as aggressive hiring pays off
HSBC's investment bank posted its highest profit since an aggressive hiring phase began three years ago, as pre-tax profits rose 37% to $3.14bn (€2.46bn) for the first six months of 2006.
The London-listed bank turned a corner on the costs of hiring nearly 1,600 securities staff last year, as Stephen Green, the group's new chairman, signalled the investment phase of the five-year plan to build the investment banking business was over and that new staff were beginning to bring home business.
He said in a statement: "Cost growth, including significant investment in our business, in the first half of 2006 was $100m lower than the increase in the first half of 2005. Substantially this reflects the completition during 2005 of the major investment phase of our corporate, investment banking and markets strategy."
It was the bank's first results presentation since John Studzinski resigned as co-head of global corporate and investment banking in May, with former co-head Stuart Gulliver taking full charge of the division.
The interim results revealed the division, which generated 25% of the group's pre-tax profit, hired 1,894 people so far this year, while Studzinski was one of 822 that left, out of a staff of more than 16,000. Global transaction banking, the custody, trade services and cash management business, hired 729 of these.
Operating costs continued to rise - to $3.7bn this year, compared with $3.5bn in the last half of last year and $3.3bn in the first half - although these were outstripped by the boost in the division's revenues.
Foreign exchange was the biggest earner, generating revenues worth $844m, up 40% on the same period last year, and credit and rates income was up 65% to $691m. Structured derivatives income nearly doubled from $216m in first half 2005 to $400m this year. The bank said this was the result of investment in technical expertise over the past three years to cater for a wider client base.
Investment banking earned $491m in revenues, up from $471m in the same period last year, although a fall from $551m earned in the last six months of last year.
The bank is advising on four of Europe's five biggest mergers and acquisitions deals this year, including Mittal Steel's takeover of Arcelor, the Suez-Gaz de France merger, E.On's takeover of Endesa and Ferrovial's bid for BAA, none of which are yet completed and so are not recorded on the balance sheet.
Revenues from lending and private equity investment were broadly the same at $606m and $220m. Equities generated $186m last year, compared to $160m the year before.
Europe generated the most revenues for the division, with $1.2bn, up nearly 70% from the $711m earned last year. The division's business in North America generated $458m, up from $379m at the beginning of 2005.
Income from asset management businesses also increased nearly 70% to $667m from $394m last year.
