Magazine article American Banker

1Q Earnings: Fee Income, Cheap Funds Helped HSBC's U.S. Unit

Magazine article American Banker

1Q Earnings: Fee Income, Cheap Funds Helped HSBC's U.S. Unit

Article excerpt

HSBC USA Inc., like most banking companies, posted strong mortgage income for the first quarter, but lower funding costs and more fee income helped drive its profits up 20% from a year earlier, to $254 million.

"A better yielding mix of loans, securities, and deposits on the balance sheet and lower funding costs contributed to the result," the unit of the London-based HSBC Holdings PLC said Monday in a press release. Noninterest-bearing deposits rose 10%, to $5.6 billion at the end of the quarter, but 86% of its deposits are held in interest-bearing accounts.

Bucking an industry trend, the $89 billion-asset unit's net interest margin rose 20 basis points from last year and 10 basis points from the fourth quarter, to 2.9%.

All told, HSBC USA paid 31% less for its deposits, a reduction that shrank its interest expenses by almost as much, to $274 million, and improved its net interest income by 10.5%, to $644 million.

Service charges, mortgage banking revenues, and securities gains also rose; the loan book remained almost unchanged, at $43 billion. Noninterest income rose 14.4%, to $899 million, almost matching the income from lending.

Youssef A. Nasr, HSBC USA's chief executive, said in the release that the results "present a positive picture in almost all aspects of our business," despite the difficult operating environment. However, "we remain cautious about the general economic outlook."

A spokeswoman said Monday that demand, at least for the unit's mortgage business, is "robust" and that it expects origination volume to remain strong, even if refinancing slows. …

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