HSBC's feeble equities division is flying, its bankers and FX traders not so much
HSBC’s CEO Noel Quinn, a 37-year veteran of the firm and amateur horticulturist, is leaving. And the bank’s Q2 results – his last as CEO – suggest that new CEO Georges Elhedery has some thriving businesses in HSBC's investment bank, although they may not be the ones that will lift all boats in a storm.
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There was a time, around the closure of Deutsche Bank's equities division, when a closure of HSBC's equities business was mooted too. Instead, Quinn cut it back and reduced sales teams and research coverage in Europe. This year, it seems to be thriving.
Revenues in HSBC's equities sales and trading business rose 107% year-on-year in Q2, compared to an increase of 'only' 37% at Citi, the next best performer. This was partly due to an abnormally poor performance in Q2 2023 but also reflected real gains from "Asian wealth flows”, as well as securities financing, which the bank credited to the onboarding of new US customers for its prime services platform.
Equities sales and trading is a small part of HSBC's combined markets and securities services business, though, accounting for only 8% of the total. The larger chunks - FX and global debt markets - were flat. And investment banking, the fees earned by HSBC's investment bankers rose only 5% compared to double-digit increases at rivals like Deutsche Bank.
The poor result in banking helps explain why HSBC's bankers have been asked to step up their schedules to a comparatively manageable three meetings a day (partly to justify travel) costs.
Across global banking and markets, which includes securities services and trade finance as well as sales and trading and traditional investment banking activities, profits rose 26% year-on-year in Q2 to $1.8bn. Around $1.5bn was attributed to entities in Hong Kong.
Quinn rose through HSBC’s ranks as a commercial banker. Next quarter’s results will be presented by Elhedery, the former co-CEO of global banking & markets. Hopefully, more than just the equities traders will be thriving by that time.
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