21 August 2019
HSBC believes higher interest rates can boost its revenue significantly. Photo: HKEJ
HSBC believes higher interest rates can boost its revenue significantly. Photo: HKEJ

HSBC sees income boost when interest rates rise

The Bank of England and the US Federal Reserve are likely to raise their benchmark interest rates in the fourth quarter this year and the first half next year respectively, moves that could help boost the income of HSBC Holdings Plc, according to the global banking giant.

Stuart Gulliver, chief executive of HSBC, believes revenue will pick up strongly about six months after interest rates move higher, the Hong Kong Economic Journal reported Tuesday.

HSBC estimates a 25 basis point rise across a range of rates will lift its annual net interest income by HK$979 million (US$126.32 million), Gulliver said.

He expects the UK economy to recover steadily, while that of China is unlikely to have a hard landing.

The banker, however, is concerned about the developments in the Middle East. Sanctions on Russia by the US and the European Commission may also have an impact on HSBC.

Despite tougher regulation on capital requirements, HSBC will keep its aggressive dividend policy, Gulliver said.

HSBC reported on Monday a 12 percent drop in pretax profit to US$12.3 billion for the first half this year.

The bank, meanwhile, warned that regulators’ zeal to punish wrongdoing was putting its staff off taking reasonable business risks, Reuters reported.

“There’s a creeping concern that staff are clearly very focused on the penalties for getting things wrong and are building risk-aversion into the way they think,” Chairman Douglas Flint was quoted as saying. “We’ve got to avoid getting to the state where there’s a zero risk tolerance.”

Flint said too-harsh rules could hurt lending in areas such as commercial banking, where products can be complicated.

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