- Women walk out of a branch of HSBC at Dubai Internet City in Dubai.
- Reuters
With the largest presence of any international bank in the Middle East, HSBC’s results usually serve as a good indicator of the health of the region’s financial services industry.
Going by the bank’s results for the region published on Monday, that outlook looks encouraging: the banking giant posted a 8.8% rise in pre-tax profit as oil prices above $100 a barrel allowed governments in the Persian Gulf to continue spending vastly on large-scale infrastructure projects.
The Middle East effort looks particularly strong compared to the bank’s overall global performance where profits fell 12% to $12.34 billion due to a lackluster performance at its investment banking unit and a slowdown in some of its most important Asian operations.
Despite the profit increase of its Mideast operations, the bank is concerned about unrest affecting other parts of the region.
“Our Middle East business continues to perform well, albeit overshadowed by regional uncertainties,” said HSBC chief executive Stuart Gulliver.
Banks active in the Middle East have been benefiting from strong economic growth in the energy-rich Gulf region where high oil prices spur massive government investments in large projects. That contrasts with places like Egypt where political instability has dampened the outlook and curtailed investments.
HSBC warned the risk stemming from political instability in the region remains a major worry.
“Geopolitical risk remained high in the Middle East with the crisis between Israel and Palestine, unrest in Egypt, the civil war in Syria and the conflict in Iraq,” the bank said. “Negotiations continued on restricting the scope of Iranian nuclear activities, which add to the risks in the region,” it added.
In the U.A.E., HSBC’s most profitable country in the region, the economic resurgence was largely led by Dubai and its recovering real estate sector. The bank’s profits in the U.A.E. increased compared to last year, in part due to improved market activity following the upgrade of the country to emerging status by MSCI Inc. Simultaneously, the brighter economic outlook helped ease the pressure on government-related entities that restructured debt in previous years in which HSBC was often heavily involved.
The Middle East accounts for 8% of HSBC’s total profits, exceeding the contribution from the bank’s North- and Latin America operations.
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(via WSJ Blogs)
