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HSBC Earnings Not Quite What They Seem


A quick take on HSBC's results

Editor's Note: This was originally published on the Buzz and Banter (click for a free trial).

The European markets are bouncing hard based on the "strong" results from HSBC (HBC).

I put strong in quotes because the two big drivers of the year on year improvement in HSBC's results were 1) significantly lower provision expense (a swing of $6.4 billion) and 2) fair value gains on liabilities and derivatives (a swing of $3.4 billion) due to HSBC's own spreads widening. (And so you know, from a historical perspective lower provision expenses and concurrent gains on liabilities represent a bit of an "Odd Couple".)

But those two items represented $9.8 billion of the $6.1 billion improvement in year-on-year results. Net interest income and trading revenue were both down, while non-interesting income was essentially flat (up 1%).
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