SIR Michael Geoghegan might be in a charitable mood, but investors aren’t; the firm’s stock shed over five per cent to close at 682p yesterday, after worse-than-expected headline figures for the full year. The disastrous acquisition of Household is still the albatross around the bank’s neck. It is busy running off the now-closed division, but a huge $15.6bn impairment charge (representing 59 per cent of total writedowns) saw the US region post a $7.7bn loss.
If 2009 was a year of disappointment, then this year will be one of promise – eastern promise. The Asia Pacific region posted pre-tax profits of $9.2bn, with Hong Kong accounting for 55 per cent of that. Although down eight per cent on a year earlier, it was a strong performance in the face of subdued economic conditions and lower interest rates.
When Geoghegan moved to Hong Kong last month, returning the power base of HSBC to the island it was born on 144 years ago, he was making a statement: he now runs an Asian bank. Profits from the Asia Pacific division accounted for a staggering 130 per cent of headline pre-tax profit; in Hong Kong, where HSBC is already the leading residential lender and credit card provider, it grew deposits by eight per cent; on mainland China, the reported value of its investments increased from $11.3bn to $25.4bn. The list goes on.
In 2010 the run-off of Household should complete, while the effects of cost-savings will accelerate. Above all, the bank expects GDP in its Asian markets to grow by six per cent, compared to an anaemic two per cent in its other regions. Geoghegan’s decision to go back to the bank’s eastern roots is sure to pay off – savvy investors will use the dip in its share price as a buying opportunity.