HSBC Bank Canada, the country’s seventh-largest bank, released its quarterly results Friday morning, and they likely contain some cues as to how its larger rivals will do when they release their results next month.
HSBC’s results are by no means a perfect proxy for what’s happening in the broader Canadian industry, because it has a unique strategy and its quarter ends in June whereas the big six banks will be reporting their results for the three months ending July 31. But some of the macro trends that turn up at HSBC are often a decent bellwether.
The bad news? HSBC’s retail or consumer banking business continues to suffer the effects of squeezed net interest margins and higher funding costs. Lending in this environment is a less lucrative business, certainly in the short-term, than it once was.
More bad news: the bank’s loan impairment charges and other credit risk provisions are double their year-ago level, having materially risen again in this latest period. HSBC said that most of the increase this quarter was due to one specific customer in the energy sector.
On the good news side, HSBC’s trading income rose 31 per cent from a year ago and 18 per cent from the prior quarter, thanks to higher market volatility and mark-to-market gains on some derivatives. But, a note of caution, trading revenue varies bank to bank in any given quarter so I’d be reluctant to take too much from this.
All told, the bank’s quarterly profit came in at $203-million, down $5-million or two per cent from a year ago. But, adjusting for tax rates and one-time items including a fee recovery last year, the profits were up 26 per cent from a year ago and 17 per cent from the first quarter.