Five global mega banks signalling a recovery this results season

WHILE the recent implosion of US investment fund Archegos Capital Management continues to dominate headlines, a number of mega banks around the world have nonetheless reported major improvements to their financial performance this earnings season.

Here are five financial institutions which have beat expectations so far.

1) HSBC Holdings

Europe's largest bank by assets reported a better-than-expected Q1 profit this week on Tuesday, with a profit before tax of US$5.78 billion for the three months ended March 31, 2021. This was up from US$3.21 billion a year ago and well above an average analyst forecast of US$3.35 billion compiled by the bank - although it remains a far cry from the US$6.21 billion for the same period in 2019.

HSBC, which makes the bulk of its profits in Asia, said its credit losses for 2021 were likely to be below the medium-term range of 30-40 basis points it forecast in February. The bank's chief executive Noel Quinn expects GDP (gross domestic product) to rebound in every economy in which HSBC operates this year, citing the successful roll-out of vaccines in the US and Britain as a key factor.

2) JPMorgan Chase

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Widely seen as a barometer of the health of the broader US economy, JPMorgan earlier this month on April 14 reported substantially higher Q1 earnings as it released more reserves. This season, the largest US bank was also aided by a blowout quarter from its trading desks and soaring investment banking fees.

Net income rose to US$14.3 billion or US$4.50 per share for the quarter ended March 31, up from US$2.9 billion or US$0.78 per share a year earlier. The results exceeded analysts' on-average expectations of US$3.10 per share, according to Refinitiv.

3) Citigroup

On April 15 the third-largest US lender beat market estimates for first-quarter profit by reporting a profit of US$7.94 billion or US$3.62 a share, as it released reserves set aside for loan losses from the pandemic. Its latest set of quarterly earnings exceeded the US$2.60 per share estimate of analysts surveyed by Refinitiv.

Net interest revenue was US10.17 billion, down 12 per cent from a year earlier. Total revenue fell 7 per cent to US$19.3 billion on low interest rates and a 10 per cent decline in loans, largely due to lower consumer credit card loan balances.

The group now plans to divest some overseas consumer units under the new leadership of Jane Fraser, who took charge as chief executive officer on March 1. Its institutional clients group will continue to offer services to clients. It will also continue to operate "wealth centre" in Singapore and Hong Kong, as well as London and the United Arab Emirates.

4) UBS

Switzerland's biggest bank on Tuesday turned in net profit of US$1.82 billion for the first three months of 2021, up 14 per cent from a year earlier and overshooting median expectations for US$1.59 billion in a poll of 20 analysts compiled by the bank. Its pre-tax profit for the quarter also came in higher than expected, due to high trading volumes and bumper results achieved during the start of the Covid-19 crisis in 2020.

The bank's earnings this quarter, however, received a US$774 million hit from the collapse of Archegos. As a result, revenue from its prime brokerage business had reduced net profit by US$434 million.

5) Credit Suisse

Despite its ongoing Greensill Capital debacle and expectations of a 600 million franc (S$869.3 million) Q2 hit from the Archegos collapse, the Swiss bank last Thursday posted a lower-than-expected loss of 252 million francs for the first quarter.

Credit Suisse chief executive Thomas Gottstein told CNBC in an April 22 interview that the bank's Q1 results represented "one of (the bank's) best quarters in the history of Credit Suisse", notwithstanding the Archegos scandal. According to the bank, adjusted net revenue would have hit 7.4 billion Swiss francs excluding significant items if it hadn't been for the Archegos situation. This would have represented a 35 per cent increase from a year ago.