Stock of the Day
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HSBC Holdings (HBC)
HSBC Profit Up, but Will the Trend Continue?
HSBC has been facing problems since the very beginning of this 'credit crunch'. For well over a year, the United Kingdom's largest bank has been struggling due primarily to high-risk mortgages, and the company has had to take on significant write-downs during this time. However, HSBC's report this morning indicates that the worst might be over for the company, and things aren't as bad as they've previously been. And although the overall financial situation still doesn't seem to be showing many signs of improvement, at least things are partially turning around for HSBC; and who knows, maybe they are just the first of many to begin to finally see the light at the end of this tunnel, or maybe this is just a temporary lull which will be followed by continued bad news.
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| Stock Analysis |
HSBC does not put out a full earnings report, like most companies do. But the bank did release some information this morning, which showed the progress the company has made since last year. The company didn't report earnings, but announced a somewhat vague statement that profits rose in comparison to the first-quarter last year. We won't have access to the exact figures until HSBC reports their first-half earnings in August. But even based on this small amount of information, analysts and investors have been pleased, sending the stock up in both the U.K. and the U.S., and with some analysts even giving the company's stock a 'buy' rating.
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Looking for some more specifics? The company did release a few figures, for those eager to crunch some numbers. The company faced $3.2 billion in loan impairment charges this past quarter, which was more than double the amount faced the previous year, but fortunately less than analysts had been expecting. The company also announced they would be taking on an additional write-down of $2.6 billion, on assets for which they have already taken a previous $2.1 billion write-down. In addition, delinquency rates (not paying mortgages or credit card payments on time) were up slightly, but have been going up at a much slower rate than anticipated. Profit actually declined in the United States, but was strong in many other areas including Asia and the Middle East.
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Even though HSBC did reasonably well this quarter, the overall tone of the company's report was one of caution. The company managed to do better than expected, but projected that the United States will likely experience a recession sometime this year, and the effects of that situation on the company are yet unknown. In addition, the uncertainty of the U.S. housing market adds another layer of hesitancy. The company speculated that their current good performance might only be a seasonal trend, and they didn't make any firm predictions for how the rest of the year would turn out. In all reality, there is not much we can determine based on so little information, and without knowing what lies ahead for the economy, not even the company itself is able to make a reasonable prediction for the future.
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