Analyst Note| Michael Wu, CAIA |
HSBC reported a good first quarter result with adjusted profit before tax at USD 6.4 billion. Comparison against previous quarters is difficult given the large credit cost at the height of the coronavirus pandemic in the first quarter of last year. With economic conditions faring better and the outlook for 2021 improving, the bank had a USD 400 billion net release from Stage 1 and 2 expected credit loss, or ECL. Management also revised ECL guidance lower for 2021. Net interest income was within expectation while non-interest income benefited from favorable market conditions. Trading income was higher while stronger capital markets underpinned net fees and commission income for wealth and personal banking. Management noted the latter was also driven by investments in wealth management in the first quarter. Around 600 wealth managers were hired in the first quarter, 100 of which in mainland China. As such, wealth balance within its wealth and personal banking division increased 2.8% against the end of 2020 and the bank expects asset under management in Asia to grow at mid single digits in the medium term.