HSBC’s Global Markets division has posted a solid quarter despite industry-wide headwinds. A number of investment banks have already reported significant declines in revenue this year due to low volatility. Fixed income and currencies have been particularly hard hit in an environment of continually compressing client activity.
Adjusted revenues at the Global Markets division increased by 7 percent to $5.4 billion. Trading at the Fixed Income, Currencies and Commodities unit generated $4.4 billion which is higher by 2 percent year-on-year. Foreign exchange declined 3 percent to account for $1.95 billion.
Compensation at HSBC Remains Competitive
Many peers of HSBC in the UK, Europe, and the US have materially underperformed when compared to last year, losing between 20 and 40 percent of revenues on a year-on-year basis. The London-headquartered bank has managed to hold its positions solid.
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Not only that but the company marked an increase in costs which was primarily driven by higher compensation. HSBC’s operating expenses were higher by 4 percent, reflecting higher performance-based pay, pension and severance costs. The company also continued strategic investment into its foreign exchange business. A broader synopsis of the institutional and retail industry will be a marquee topic of discussion at the 2017 Finance Magnates London Summit this November.
Commenting on the results during the company’s earnings call, CFO Iain James Mackay said: “Global Banking & Markets continued to grow revenue despite a challenging quarter for the industry, demonstrating the benefits of its differentiated business model.”
“It achieved this largely through growth in Global Liquidity and Cash Management, Equities and Securities Services, which exceeded the impact of subdued market activity on our banking and fixed income businesses,” he elaborated.
Despite subdued market activity, HSBC’s continuing market share gains contributed to a very positive quarter when compared to industry peers. A material, 25% increase in equities revenue was all but eliminated from the impact of lower fixed income revenues.