Both HSBC Holdings (LON:HSBA) (NYSE:HCS) and Barclay’s (LON:BARC) both benefited from a decline in loan losses during the third quarter, but while HSBC reported a healthy profit, Barclays reported a 54% drop in earnings.
HSBC’s pretax profit was greater than it was during the 3rd quarter of 2008, despite a 43% decline in its U.S. consumer finance division. Meanwhile, Barclays’ net income fell to $1.8 billion (1.08 billion GBP), down from 2.33 billion GBP a year ago.
HSBC said that the hindrance from bad loans and related costs declined following a restructuring of its U.S. unit. Executives at HSBC made a move to freeze lending in its consumer finance unit in the United States in March and since then its costs were the lowest since the first half of 2008, which contrasted starkly with Barclays where expenses are rising and another 750 employees were hired in its investment banking division. Barclays said t hat its impairments rose “significantly” to over 6.2 billion GBP for the first nine months of the year.
Barclays has significantly increased its dependence upon investment banking, hiring more employees this year to expand its advisory and equities division in Europe and Asia after it had purchased Lehman Brothers’ North America unit.
Douglas Flint, HSBC’s Finance Director, said that its investment bank unit performed “not quite as strongly as in the first half of the year,” during a conference call with journalists. Barclays’ revenue of 3.7 billion pounds has declined from the second quarter, which reflected a “seasonal slowdown,” the bank said today.
