BANKS HSBC’s first-half profits miss expectations as bank sets aside more funds for loan losses

A pedestrian walks past illuminated signage for HSBC Holdings Plc displayed outside a bank branch in the Central district of Hong Kong, China.

Anthony Kwan | Bloomberg | Getty Images

HSBC reported a 65% fall in pre-tax profits for the first half of 2020 to $4.3 billion — missing analysts’ expectations.

Chief Executive Noel Quinn said the bank was “impacted by the Covid-19 pandemic, falling interest rates, increased geopolitical risk and heightened levels of market volatility.”

HSBC shares in Hong Kong tumbled by more than 3% when trading resumed after a lunch break. 

Source: CNBC

Not surprising for the results for EU banks. I specifically highlighted EU banks instead of the banking industry as a whole is because you will notice that the big US banks who reported their earnings did better as a whole in this pandemic. 

Primary reason for US banks is that they are pretty balanced in their business segment, Consumer banking, Corporate banking, Investment banking. In this crisis, consumer and corporate banking is taking a hit with retrenchments and bad sentiment all over the mainstream media. With companies going into bankruptcy, corporate activities are also likely slowing down. Since Feb the markets have been very volatile and this benefits the investment banking arm because with high volatility comes big volumes. With big volumes in US especially, you will notice that all the big US banks (JP Morgan, Bank of America) were able to negate the other business segments and the big US brokers (Morgan Stanley, Goldman) as well. However there are exceptions like Wells Fargo whose primary business is with consumer and corporate and you will notice that they suffered badly in this period. Even Warren Buffett has increased his stakes in Bank of America recently even though he is not a big fan of going beyond 10% of any holdings due to regulatory requirements that he needs to now adhere to. 

With this in mind, it is likely most of the EU banks are going to suffer quite badly as their investment banking arm is not as strong as the US counterparts (likely apart from Credit Suisse and UBS) and they may even exit this investment banking segment due to the cost of capital. This may result in further consolidation of power within the big US banks and unlikely to falter anytime soon as long as they do not do anything funny like what they did during 2007-2008.

Disclaimer: Whatever posted here is purely my personal view. It is not an inducement to trade and not responsible for any losses. Tips and News might just be rumors in the market. I take no responsibility for any gains or losses as a result of reading my analyses, judgement and opinions. Trade with care and diligence please!

Singapore Banks likely to cut their dividends

Not surprising, the latest news in Singapore is on the potential dividend cut from the 3 local banks, DBS, OCBC and UOB. Please note that Singapore is lagging behind in this as all EU banks are not allowed to pay dividends or stock buybacks and US banks has some restrictions but the big US banks have cleared those requirements though apart from Wells Fargo. 

DIVIDEND cuts by Singapore banks may happen "as early as" the upcoming payout to be announced in the second quarter, with the regulator reviewing banks’ capital plans amid prolonged economic uncertainty, said DBS Group Research in a report this week. 

The Monetary Authority of Singapore (MAS) said last Thursday it is in close discussions with banks on their capital management ahead, which would include conversations around - though not limited to - restricting dividend payouts. Banks "should start early and not wait until the capital position starts looking weaker", MAS managing director Ravi Menon had told reporters.

Source: Singapore Business Times

Looking at the intraday effect on the 3 banks, all 3 banks have dropped more than 2% (DBS at -3%, UOB at -2.6%, OCBC at -3.48%).

Let's take a look at the daily and weekly chart of DBS and it has crossed over to the 100MA and touching the 38.2% Fibonacci. Will need to monitor if the support will be at the 38.2% mark. 

Looking at the weekly chart, it is now at the end the big green bar of week of 1 June so we will need to see if it closes below that today ($19.54) taking into consideration that Friday is a public holiday in Singapore so its a shorter week.  

* I do not own any DBS shares currently. 

DBS Daily as of 11am HKT

DBS Weekly

Disclaimer: Whatever posted here is purely my personal view. It is not an inducement to trade and not responsible for any losses. Tips and News might just be rumors in the market. I take no responsibility for any gains or losses as a result of reading my analyses, judgement and opinions. Trade with care and diligence please!

US Markets closing higher with Nasdaq and Russell

US markets closed higher for the day and Russell 2000 is the highest gainer for the day with 2.10%. Nasdaq was the next best performer with 1.35%.

If you remember my previous post, I mentioned about the Financial and Energy sector which they had a good run as well especially with Bank of America, JP Morgan and Energy companies like Exxon, Chervon and BP. 

Will share more insight on these two sectors soon!

Disclaimer: Whatever posted here is purely my personal view. It is not an inducement to trade and not responsible for any losses. Tips and News might just be rumors in the market. I take no responsibility for any gains or losses as a result of reading my analyses, judgement and opinions. Trade with care and diligence please!

Looking beyond Tech and Gold

I will be sharing some views on 2 specific sectors that are underperforming and may have a good opportunity for an upward move. Currently as we can see, Tech and precious metals like Gold and Silver are leading the way in the markets and mainstream media so it would not be good to chase high prices in case of picking up what the big boys may dump. 

2 sectors that I am looking at currently is energy and financials which both are lagging behind.