One basic assumption in today’s budget would be that the current divorce process can secure a deal. HSBC’s biggest challenge was to tame its cost.
Philip Hammond, Chancellor of Exchequer is the key star of the day. Theresa May declared earlier that there is no need for the U.K to keep its belt tightened like the austerity days. Basically, she has made life easier for her by declaring the end of austerity but things have become more arduous for Chancellor of the Exchequer who is going to deliver the UK.’s budget today.
One basic assumption in today’s budget would be that the current divorce process can secure a deal. Theresa May hasn’t been able to secure any divorce deal and the current negotiations are in the deadlock stage. Hence, it is going to be extremely arduous for Phillip Hammond to talk about tax cuts and an increase the spending.
In fact, one could feel the pain of Philip Hammond if they factor in the sluggish growth of the UK’s economy. This is because the U.K’s economy faced sluggish growth since the 2016 referendum and if there is no deal, the UK’s economy may only grow by 0.3% in 2019.
Of course, Hammond has already warned that the U.K may have to face a prolonged period of austerity and emergency budget if there is no deal between the U.K and the EU. What is expected from the budget is that the Chancellor will bring forward the income tax cuts and introduce public spending steps. Also to make sure that the global tech giants such as Amazon and Google pay the right amount of tax.
Earnings
The key to satisfy the shareholders is to spend less and deliver higher growth numbers and in today’s earnings report, HSBC has nailed this. The bank’s biggest challenge was to tame its cost.
In its earnings report, the numbers across the board were encouraging; return on equity in the first nine months was 9 percent versus 8.2% in the year-ago period. Adjusted pretax profit surged to $6.19 billion versus the estimates of $5.73 billion. Expected credit losses number increased 13% to $507 million. The bank needs to continue to focus on its wealth management business in China and Hong Kong and we think that the new CEO, Flint is determined to deliver on this.
Asia is the key market for HSBC and there is no doubt that the bank needs to spend on technology which would help the bank to deliver on efficiency. The bank needs to boost its revenue by keep taping into retail clients. The bank’s deposit margin boosted as a result of this and this is an encouraging sign for shareholders.
