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Profits show HSBC's value to UK?

Tuesday, May 05, 2015 - 02:14

Europe's biggest bank HSBC posted a 4 percent rise in first-quarter pretax profit, after investment banking revenue bounced back. The better than expected results come as HSBC considers moving its headquarters back to Asia. Ciara Lee reports on what the future holds for the bank.

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It's Europe's biggest bank and one the region is keen to keep hold of - particularly after a four percent rise in first-quarter pretax profit. HSBC's forecast beating results were thanks to a bounce back in investment banking. The bank's trading desks also benefitted from a surge in market volatility this year. HSBC is set to make a decision on whether to move its headquarters back to Asia within months. A jump in Britain's bank levy has prompted it to consider moving. It will pay around 1.5 billion dollars under the levy this year - about 7 percent of its expected pretax profits But ETX Capital's Joe Rundle says it's partly an attempt by management to persuade the UK government to ease up on fines and levies. (SOUNDBITE) (English) ETX CAPITAL HEAD OF TRADING, JOE RUNDLE, SAYING: "I think part of it is political gamesmanship. I think they could revive the Midland Bank. We've seen it with TSB and the spin-off there for the Lloyds Brand. But I do think HSBC as a whole would be powerful as a single brand." HSBC's original home Hong Kong has seen its economy flourish over the last 18 years under a formula with China dubbed 'one country, two systems'. But that model expires in 2047 and there's concern Beijing could impose greater control over the territory and make it harder for western regulators. (SOUNDBITE) (English) ETX CAPITAL HEAD OF TRADING, JOE RUNDLE, SAYING: "It will cause tension because the regulatory environment is different there and the way of doing business is different. You will get pressure, but regulators are behind the curve generally and wouldn't be able to react to the changes quick enough." HSCB's earnings were more modest than Swiss rival UBS's though - it posted its highest quarterly profit in nearly five years. Net profit for the first three months of 2015 reached nearly two billion dollars as the bank's wealth management sector bloomed. UBS is in advanced talks with the U.S. to settle allegations of foreign exchange market rigging. Regulators have already fined six major banks including UBS a total of 4.3 billion dollars for failing to stop traders from trying to manipulate the forex market.