Getting caught money-laundering for the Iranians and drug cartels is pretty bad for business, as HSBC’s 2012 results demonstrate. But coming into compliance with all these new banking regulations is even worse.
Disgraced though HSBC may be, what with the $4 billion-plus it paid in fines to regulators last year, and the 17% drop in profit that entails, the old Hongkong and Shanghai Banking Corp. managed to shrink less than its friends in Frankfurt in an unusual race backwards, thereby dethroning the Germans as Europe’s largest bank. Read more »
A lot of people are wondering this morning how HSBC was able to see a rise in first quarter profits, despite rising bad-debt charges in the U.S. and a sizable writedown in its investment banking arm. The most popular theory pins the gains to higher returns in Asia, the Middle East and Latin America. DealBreaker readers who have been paying attention know that the key to HSBC’s success is far more subtle: the elimination of acronyms. Who’s laughing at asinine corporate directives now?
Earlier: We Need To Make This Thing Work. What’s The Key To Making This Thing Work? NO. MORE. ACRONYMS. If I See Or Hear One Person Not Spelling/Saying The Whole Word Out, I Will Go Carnival-Freak Crazy On Your Ass. I Mean It, I’ll Scratch Your Eyes Out.
3rd UPDATE: HSBC 1Q Profit Ahead Of 1Q07 Despite US Impairments [CNN Money]
The banks have won the first big show down with private equity.
Last night several news outlets, including the Wall Street Journal, reported that private equity giant Kohlberg Kravis Roberts has signaled a willingness to include a financial covenant for the bank loan portion of the $24 billion of debt needed to finance its purchase of First Data.
First Data was largely viewed as a test case for some of the biggest, and riskiest, of the highly leveraged buyout deals that are scheduled to close in the next few weeks and months. The banks had been asking the private equity sponsors of the deals for concessions on the terms of the financing, saying it was having trouble syndicating the debt due to recent concerns about debt levels by many investors.
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Britain’s largest bank announced today that it will not be implementing a plan to make money by charging interest on graduate overdrafts, because Facebook.com asked it not to. HSBC caved after catching wind of a group on the social networking site called “Stop the Great HSBC Graduate Rip-off,” whose 5,756 members requested that the financial institution *not* charge them interest, referred to the bank as a “spin machine,” and encouraged friends and family to go elsewhere out of spite. (One member, Martin Deakins, posted on the group’s wall: “YEAH see HSBC you cant just f**k us over as and when you feel like it.” Another, Michael Dean Anderson, perhaps a mole sent by the banking giant, wrote: “You all really need to get over yourselves and just pay it back. Fucking freeloaders: hate ‘em. Much love.”)
The reversal marks a victory for grads who would sooner opt to have money versus not have money, and a new low for the bank (next, Goldman Sachs’s GEO will slash fees from 2/20 to 0/10 to 0/0, under pressure from a group formed by a bunch of Stern kids pushing their luck). Some might also regard it as accomplishment for the Facebook family, though it disappoints us greatly to see something that was created soley for the purposes of stalking classmates and/or getting laid to be used for such constructive means. Stuff like this was never in Adidas flip-flop boy’s business plan.
HSBC submits to online student protest [Times Online]
Can HSBC Really Be Just That Dumb? [myvestauk]
If you work in structured finance, you might soon be getting fired, unlike Rick Ziwot, who voluntarily left his job. HSBC confirmed today that Ziwot will depart from his post as the bank’s global head of structured credit products, to be replaced by Jeff Jakubiak, head of structured credit products for Europe, the Middle East, Africa and Asia. Allegra Kelly will become deputy head of the structured credit products group (a title that includes a badge, plus chaps and spurs).
Think Ziwot’s exit has anything to do with fears of major losses for collateralized-debt-obligation investors affected by subprime? Think again. According to HSBC, Ziwot’s departure (and the ensuing shuffle) has nothing to do with the meltdown in the market. Rather, it had to do with “a decision by Rick Ziwot to retire after his 45th birthday, which was in July.” Okay, we’ll buy. You set a deadline for yourself and you stick to it, man, you fucking stick to it. (But seriously, who among hasn’t planned to retire at 45? This sounds legit to us, no sarcasm implied.)
Structured-Products Head Is Set to Leave HSBC [WSJ]
Senior US credit banker Caplan departs RBS [Times Online]
HSBC said today that thanks to a strong showing in Asia, and its commitment to fixing that small $600 million pickle it got itself into, things are looking pretty okay. Chief Executive Michael Geoghegan gave a somewhat convincing speech to shareholders this morning:
Some commentators have asked, ‘Should we be in this business?’ We paid $14.8 billion for this business in 2003, and it has already generated profits for your group totaling over $9 billion. In my book, this is a good business for us.
[Wouldn't a simple "yes" have been a bit more believable? "For sure" seems out of the question, and "Definitely" just sounds silly but next time, we'd appreciate a little more enthusiasm.]
The bank noted that the subprime situation did not “deteriorate” during the first months of 2007 and that “underlying credit impairment experience in the UK bank was broadly in line with the previous quarter.”
Putting a damper on Geoghegan’s excitement is Deutsche Bank AG analyst Krista Yue, who said, of the “non deterioration”: “That’s not fully encouraging. There could be redefaults on the restructured loans, which will hit profitability. Our concern is the duration in which the deteriorations will persist.” [Germans, always with their nay saying and negativity, their god damn negativity].
Anyway. HSBC also announced that in Hong Kong, thriving equity markets boosted investment-related fees and brokering income, and in Latin America, revenue growth is “encouraging.” Private banking delivered “excellent results.”
On a more personal note, today marks the first anniversary of HSBC’s Chairman Stephen Green-Chief Executive Geoghegan management of the bank. We here at DealBreaker always knew they could do it. Call-girls and ice cream sandwiches on us.
In other news, high returns in the exploitative banking sector have boosted Satan’s Portfolio by 25 percent this quarter.
HSBC says makes good start to 2007 [Reuters]
Subprime troubles contained, HSBC says [Buffalo News]
Can this be for real?
We hope so. It would make a very nice theme song to the HSBC sitcom we’ve been planning.
HSBC reported its earnings for 2006 this morning and it’s all everyone can do not to go into anaphylactic shock over the fact that the cost to cover debts primarily associated with subprime loans climbed 36%. HSBC, naturally, wants you to know that there’s nothing to “worry your pretty little heads over,” and that maybe you should all just take a Valium and chill for the day. Chief Exec Michael Geoghegan said in a conference call that “This is not trailer park lending…this is main street America, [where customers typically own homes worth $190,000],” adding that he needs at least two to three years to fix HSBC’s U.S. loan problems. As she’s wont to do, Michelle Leder at footnoted.org may already have uncovered one of the bank’s central problems in this mess.
Buried in something that I like to call “Enron Beelzebub” typeface [of HSBC USA’s10-K] were some interesting disclosures on housing perks for top executives. For example, Martin Glynn, the former CEO of HSBC USA (he stepped down at the end of December) received a $177,600 rent allowance and another $150K to cover the tax gross-up on the rent. Brendan McDonough, who was recently promoted to oversee the problems at HSBC Finance received a $75K rent allowance and a $62K gross-up as well as another $122K for “housing and furniture allowance”, which appears to be in addition to the rent and the gross-up. Unrelated to the housing, but still interesting, was something called “additional cash compensation” for Glynn of $7.2 million, which was primarily due to $6.6 million in “general employment benefits.”
Now, when you’re making $700K a year in base salary (not including other goodies) and still need help paying for a place to live, is it really any wonder that HSBC seems to have missed some of the signals that they were over-exposed in the subprime housing market whether or not the loans were made to “trailer park” people?
(Also– we realize when you’ve lost “a few bill. or so,” the only thing you’re going to say is “Everyone relax, this is so not a big deal,” but is anyone else with us in thinking that if HSBC were like, “Listen, we’re going to shoot you straight– we fucked up big time,” they could salvage at least a tiny bit of self-respect? Anyone? Okay.)
Part of the problem? [footnoted.org]
HSBC 2nd-Half Net Falls Less Than Analysts Estimated [Bloomberg]
Get ready to see those HSBC resumes. The bank cut twenty jobs from its bond group in New York, Bloomberg reports. Quite a few were very senior positions, including two managing directors and a co-head of government bond trading. This follows the reported dismissal of eight investment bankers in Asia.
HSBC Holdings Plc, Europe’s biggest bank by market value, cut about 20 positions in its bond group in New York a day after the firm reported a drop in trading revenue, said two people with knowledge of the firings.
Pierre Goad, a London-based spokesman for HSBC’s investment bank, confirmed there were dismissals. He wouldn’t provide details on the number of job losses or the positions. The reductions were out of a group of 130 worldwide in bonds in New York, Hong Kong and London, according to one of the people.
The departures included Patrick Haskell, 34, a managing director and head of North American interest-rate sales and trading. Haskell, who joined last year from Credit Suisse Group, said in an interview that he resigned. He declined further comment. Michael Furman, 45, a managing director and co-head of rates sales, Greg Bartoli, 29, the co-head of government bond trading, and George Nunn, 38, a derivatives trader, also left. Furman declined to comment, while Bartoli and Nunn couldn’t be reached.
HSBC Cut 20 Bond Trading Jobs in New York, People Say [Bloomberg]
Yesterday it was announced that M&A big John “Studs” Studzinski is leaving the HSBC Group for the Blackstone Group. Studs made his reputation as the top dog for Morgan Stanley’s M&A business in Europe during the 1990s. Originally from Boston–he graduated from St Paul’s and Bowdoin College– Studs moved to London a few years after getting his MBA from Chicago. While working at Morgan Stanley, he gained a reputation as a master dealmaker and networker, as well as a philanthropist and patron of the arts. A few years back the Pope even knighted him for his good deeds. Three years ago he left Morgan Stanley for HSBC, where he was charged with ramping up the banks M&A business.
We’d write more but the sources below pretty much cover the story. Also, writing about wealthy, successful people who are also so ridiculously…uhm…we guess the work is “good”…well, it makes us uncomfortable. We can already feel the brimstone scorching our souls without having to be reminded of it by guys like Studs.
HSBC Banker Jumps to Blackstone [NY Times]
Studzinski leaving raises doubts about HSBC’s commitment [Financial Times]
HSBC’s Top Global Banker Quits [WSJ]