HSBC has almost doubled its quarterly gains from its Middle East operations, as the bank lays off staff in the region and prepares for further cost-cutting across its business worldwide.
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Back to business
The bank, the largest in Europe by market capitalisation, reported profits before tax of $335 million (Dh1.23 billion) for the first quarter, up 91.4 per cent on a year ago.
Improved profits in the Middle East were driven by "earlier actions to reposition certain portfolios, and improved credit conditions in Dubai", the bank said in a statement.
"While the UAE and Saudi Arabian economies continued to recover, political unrest in parts of the region contributed to a general reduction in customer activity."
At a global level, the bank posted a 52.2 per cent rise in net profits to $4.4bn (Dh16.1bn).
The improved profits come as HSBC plots wide-ranging measures to rein in costs, which have already seen the bank cut around 3 per cent of its workforce of 12,000 in the Middle East and North Africa.
Corporate lending saw the fastest growth during the quarter. Net loans and advances for the Middle East region rose 1.7 per cent to $26.7bn (Dh98bn), driven by a 4.6 per cent increase in corporate and commercial lending.
However, the increase masked a 2.7 per cent decrease in retail lending and a 23.1 per cent drop in lending to financial institutions.
"Revenues were marginally lower compared with Q1 2010 and modest lending growth and strong growth in deposits during the quarter reflected progress in consolidating our position as the market leader for cross-border trade finance in the region," the bank added.
Costs for the Middle East were 19 per cent higher than a year ago as a result of investments intended to grow the bank's business.
The plan for the HSBC's future will be revealed at an investor meeting on Wednesday. HSBC recently pulled out of retail banking in Russia and has begun restructuring its Latin American operations.
Asked whether the bank's Asian operations would see the same kind of cost-cutting as other parts of the world, Stuart Gulliver, HSBC chief executive, said: "There are a lot of places where we need to look at higher expenses before we ever get to Hong Kong."
[ends]
Tributes from the UAE's personal finance community
• Sebastien Aguilar, who heads SimplyFI.org, a non-profit community where people learn to invest Bogleheads’ style
“It is thanks to Jack Bogle’s work that this community exists and thanks to his work that many investors now get the full benefits of long term, buy and hold stock market investing.
Compared to the industry, investing using the common sense approach of a Boglehead saves a lot in costs and guarantees higher returns than the average actively managed fund over the long term.
From a personal perspective, learning how to invest using Bogle’s approach was a turning point in my life. I quickly realised there was no point chasing returns and paying expensive advisers or platforms. Once money is taken care off, you can work on what truly matters, such as family, relationships or other projects. I owe Jack Bogle for that.”
• Sam Instone, director of financial advisory firm AES International
"Thought to have saved investors over a trillion dollars, Jack Bogle’s ideas truly changed the way the world invests. Shaped by his own personal experiences, his philosophy and basic rules for investors challenged the status quo of a self-interested global industry and eventually prevailed. Loathed by many big companies and commission-driven salespeople, he has transformed the way well-informed investors and professional advisers make decisions."
• Demos Kyprianou, a board member of SimplyFI.org
"Jack Bogle for me was a rebel, a revolutionary who changed the industry and gave the little guy like me, a chance. He was also a mentor who inspired me to take the leap and take control of my own finances."
• Steve Cronin, founder of DeadSimpleSaving.com
"Obsessed with reducing fees, Jack Bogle structured Vanguard to be owned by its clients – that way the priority would be fee minimisation for clients rather than profit maximisation for the company.
His real gift to us has been the ability to invest in the stock market (buy and hold for the long term) rather than be forced to speculate (try to make profits in the shorter term) or even worse have others speculate on our behalf.
Bogle has given countless investors the ability to get on with their life while growing their wealth in the background as fast as possible. The Financial Independence movement would barely exist without this."
• Zach Holz, who blogs about financial independence at The Happiest Teacher
"Jack Bogle was one of the greatest forces for wealth democratisation the world has ever seen. He allowed people a way to be free from the parasitical "financial advisers" whose only real concern are the fat fees they get from selling you over-complicated "products" that have caused millions of people all around the world real harm.”
• Tuan Phan, a board member of SimplyFI.org
"In an industry that’s synonymous with greed, Jack Bogle was a lone wolf, swimming against the tide. When others were incentivised to enrich themselves, he stood by the ‘fiduciary’ standard – something that is badly needed in the financial industry of the UAE."
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