Why HSBC Is Up 24% This Year

LONDON -- HSBC (LSE: HSBA.L  ) has advanced almost 24% to 609 pence so far during 2012, making the share one of this year's best performers in the FTSE 100 (UKX).

The bank, one of the largest banking and financial services organizations in the world, with around 100 million customers overall, seems to have impressed investors with a series of encouraging statements.

During February, HSBC issued its annual report for 2011. Reported pre-tax profit was up 15% to $21.9 billion. It was a record year in commercial banking, with pre-tax profit up an impressive 31% to $7.9 billion. Sustainable cost savings of $0.9 billion had been achieved, with further savings in the pipeline. And a strategy to reshape the group, improve returns, and position it for growth had been launched.

During May, an interim management statement for Q1 showed that while reported pre-tax profit was down, underlying pre-tax profit had increased by $1.4 billion compared with Q1 2011, and by $3.4 billion over the preceding quarter, largely because of strong first-quarter revenue performance by the Global Banking and Markets operation. Cost reductions were continuing successfully, with $0.3 billion achieved in Q1.

Then in August, an interim report for the first half of 2012 revealed that pre-tax profit was up 11%. to $12.7 billion, with strong performances in faster-growing regions and higher revenue in Hong Kong, the rest of Asia-Pacific, and Latin America. Sustainable cost savings of $0.8 billion had been achieved, and HSBC's core Tier 1 capital ratio had increased during the period from 10.1% at the end of 2011 to 11.3% at the half year.

Stuart Gulliver, group chief executive, commented:

The challenging macroeconomic context only serves to underline the importance of continuing to manage HSBC with proper discipline. In order to achieve this, we announced three immediate priorities at our strategy day in May. These are to simplify the business further, to continue to restructure and to grow the business. Focusing on these priorities will be essential in positioning HSBC for future growth.

HSBC’s expertise and geographic footprint across both developed and faster-growing economies mean that the Group is well-positioned to help our customers and shareholders benefit from the continued redrawing of the world’s economic map. By delivering on our strategy, we are determined to help our customers make the most of the opportunities on offer.

HSBC's next trading update, for Q3, will be published on Nov. 5, which may reveal further upbeat news that can impress investors.

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