STEPHEN and Stitt - the iconic HSBC Holdings Plc lions - are crouching and ready to pounce.

Adjusted profit from Asian operations jumped 8.5 per cent from a year earlier to US$4.76 billion, first quarter results showed on Friday. That's even as ho-hum performance everywhere else dragged down return on equity to an annualised rate of 7.5 per cent, a drop of 50 basis points.

Lending volumes rose handsomely in 2017. This year's big expectation is that growth will continue apace even as profitability of loans improves. Net interest margin of 1.67 per cent in the first quarter was already a four-basis point improvement over all of last year.

But HSBC's chairman Mark Tucker and chief executive officer John Flint don't need a kill. Not just yet. What the Asia-focused, London-headquartered bank wants from its new management is a fresh lease of life, and not just the lifeline of rising interest rates.

Let analysts salivate over Hibor, the key Hong Kong interest rate that's already risen to its highest in almost a decade. A blockbuster IPO by handset maker Xiaomi Corp, the world's biggest in several years, is almost guaranteed to push the city's borrowing costs even higher than the 1.84 per cent they've hit for six-month interbank loans.

Depositors are becoming more demanding: China Citic Bank International Ltd is willing to shell out 3 per cent to new savers who park funds for three months. HSBC can always rely on a strong deposits franchise in its most important market to lock in funds at 1.35 per cent for six months.

That pricing advantage means loans made by HSBC will be more competitive, profitable, or both. But with its mortgage and developer loans in Hong Kong growing at 16 per cent last year, and advances to customers in mainland China expanding by 22 per cent, there has to be a limit to how much more juice HSBC can get out of the meat-and-potatoes business with-out storing up asset-quality concerns.

Safety first

For a bank that's just starting to turn the page on a messy and costly multi-year settlement with US authorities over its role in financing Mexican drug cartels, safety first is the motto, and patience is a virtue. Buybacks are a good short-term hook, and finance director Iain Mackay surprised investors by announcing a scoop-up of US$2 billion in stock, a quarter ahead of expectations.

Investors may take less kindly, however, to HSBC's statement that no more buybacks will be in the offing this year. They had played a large role in the London-traded stock's near 17 per cent jump last year. Shares are down 6 per cent so far in 2018.

Yet a more rewarding strategy would be to convince investors to trust management to put capital to work in growth initiatives. Hence, expect Mr Flint to sell HSBC to investors as the default banking option for the Greater Bay Area, an agglomeration connecting Hong Kong with Macau and China's Guangdong province. Since this Beijing-backed plan is still a work in progress, HSBC can take its time pursuing this ambition.

Mr Tucker, meanwhile, can help Mr Flint build up an insurance and asset management business. The ex-AIA Group Ltd CEO knows how to increase premiums in a region hungry for wealth and protection offerings.

Then there's digital. Giving analysts a peek last month into HSBC's Google-style tech campus at Tsing Yi, near Hong Kong airport, was Mr Flint's and Mr Tucker's way of demonstrating resolve to take on fresh challengers, especially the BAT trinity of Baidu Inc, Alibaba Group Holding Ltd and Tencent Holdings Ltd.

More traditional rivals are also warming up to fintech. Each of Singapore-based DBS Group Holdings Ltd's digital customers is three times as valuable as somebody who still needs to be served in the physical world.

None of these initiatives can be a mere hobby for HSBC. Hong Kong's prosperity, and the resilience of its property market, are vital to the lender. The Bank for International Settlements has been flagging the rapid buildup in Hong Kong's 300 per cent credit-to-GDP ratio as an early warning signal of a banking crisis.

A more than US$600 million jump from a year earlier in first quarter operating expenses and a surprise charge for past misconduct drove HSBC shares lower after the earnings. Depending on a rising Hibor to stretch the jaws - industry jargon for increasing revenue faster than costs - can only go so far. And although trade finance is booming again, the shadow of a China-US trade war is looming.

Bear in mind that while Mr Flint, a HSBC veteran, and Mr Tucker, an outsider, are recent arrivals in the top jobs, messieurs Stephen and Stitt - the HSBC lions - are almost 100 years old.

Powerful jaws won't be enough for these beasts. They'll need strong legs to run down new prey. BLOOMBERG