HSBC

HSBC says Q1 profit up, bad debts jump

LONDON - EUROPE'S biggest bank HSBC Holdings said its profit in the first quarter was ahead of a year earlier as growth in Asia and elsewhere helped counter another big hit for bad debts on US home loans.

HSBC said on Monday its bad debt charge related to its US consumer finance business was $3.2 billion (S$4.38 billion) for the first quarter, down from $4.6 billion in the previous quarter but double the level of the first quarter of 2007 as problems in the subprime housing market work through its loan book.

HSBC said its underlying revenue growth in the first quarter was comfortably ahead of a year ago, even after absorbing a $2.6 billion write-down in its global banking and markets investment banking unit. -- REUTERS

http://www.straitstimes.com/Latest%2BNews/Money/STIStory_236586.html

Hello, every one,

The above is from today's straits time article. Since in lecture series 9-10 we learned size of firms and cost theory, i think HSBC is a very good example of big firms.

--My analysis of HSBC--
Since banks are special kind of firms in the market, the most critical activity of banks is investing. I think HSBC is a very successful bank in the world. It has a very long history of development. After merging with many other banks all around the world, it has become the Europe's biggest bank now.

As mentioned in the article, even HSBC was affected by the USA subprime housing market and bear a huge loss, it can still have a growth of profit in the first quarter of this year. I think the most important thing is that HSBC diversifies its investment very well:

1. It now has many branches all over the world, USA, Hong Kong, China, Sigapore, Maylasia, Turkey, Spanish, etc. This is spatial diversification of investment. As such, even HSBC is making a loss in the USA subprime housing market, it can still earn much profit from the investment in many other countries.

2. It diversifies its investment in many different sectors. It provides customers with different services according to different demand. Firstly, it offers large amount of loans. Secondly, it provides service of insurance. Thirdly, it provides an award-winning range of custody services. It also offers other different services in different areas. For example, in Hong Kong, HSBC is one of the 3 issuers of Hong Kong yuan. This brings HSBC much profit since the bank itself is partially playing the role of government and it has sufficient influence on the local economy.

Hence, by diversifying its investment all around, the ability of risk-bearing is much greater than other banks in the world. Another important factor of HSBC's success should be that HSBC keeps on merging with other banks or investing to hold shares of other banks. This allows HSBC to exert a great influence in many regions. And this influnce is sometimes big enough to be considered by government. Thus, it can receive more incentives from the government. Moreover, by merging with other banks, HSBC is enjoying greater internal economies of scale and this also gives HSBC more monopolistic power.

In conclusion, i believe that HSBC is a very good example of big firms and the bank is still growing.

For more informaiton HSBC, you may refer to the below links:
English site: http://en.wikipedia.org/wiki/HSBC
Chinese site: http://bbs.hiall.com.cn/viewthread.php?tid=17176

So hope all the information will be useful.

Yours sincerely,
Li Xiaoyi