HSBC Holdings plc
) is slated to report second-quarter 2014 results on Monday, Aug 4.
In the preceding quarter, this foreign bank delivered disappointing
earnings, declining 18% year-over-year, mainly due to a decrease in
revenues. However, this was partially offset by a fall in operating
Will HSBC be able to reverse the trend this time or will it once
again succumb to the tough industry backdrop? Let's see what
factors might have influenced the earnings.
Factors Influencing Q2 Results
Business restructuring in order to withstand any further crises
remained the key trend among the non-U.S. banks this quarter, with
HSBC being one of them. The company's strategy of focusing on its
core operations through selling or closing less profitable ones,
remain the chief cost-controlling factor. Operating expenses, in
our opinion, will show a downward trend this quarter as well.
Nevertheless, the low interest rate environment persisting during
the quarter resulted in the central banks of most countries
prioritizing growth over inflation control. Hence, subdued interest
income growth should dampen HSBC's top line.
Additionally, slump in trading income is expected to hamper
top-line improvement with continued low level of client activity in
the second quarter. Further, loan growth is expected to remain
muted, which will in turn, adversely impact HSBC's revenues.
Also, HSBC has been embroiled in several lawsuits and
investigations. As a result, the company might have retained
additional reserve for litigation expenses, which would hurt the
bottom line to some extent.
HSBC currently carries a Zacks Rank #4 (Sell).
Other foreign banks that are expected to release results in the
coming days include Itau Unibanco Holding S.A. (
), Royal Bank of Canada (
) and The Toronto-Dominion Bank (
). Itau Unibanco will report second-quarter results on Aug 5, while
Royal Bank of Canada and Toronto-Dominion are scheduled to report
third-quarter fiscal 2014 (ended Jul 31) results on Aug 22 and Aug
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