Analysis And Comparison Of Hsbc And Barclays Bank Finance Essay

This study compares fiscal public presentation of two major Bankss of UK i.e. HSBC Bank Plc and Barclays Bank Plc on the footing of their Balance sheets and net income and loss histories for the twelvemonth 2009. This study besides provides SWOT analysis of both Bankss i.e. HSBC and Barclays Bank Plc and provides an penetration into their Banking Schemes.

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The cardinal fiscal indexs for measuring fiscal public presentation of any bank are Profit Before Tax, Capital Ratio, Adjusted Gross Leverage, Loan Funding Ratio, Net income, Assets and Liabilities, Equity and Share Holders return.

Barclays reported net net income of ? 10,289 milllion in 2009, an addition of 96 % as compared to 2008.Although Barclays Bank UK reported a lessening of 55 % in net income before revenue enhancement and it was ? 612 million in 2009.Barclays commercial bank net income before revenue enhancement lessening 41 % to ? 749 million in 2009.

HSBC Bank Plc and its group subordinates reported net net income of ?3,158 million as compared to ?3,523 in 2008, a lessening of 10.36 % than old twelvemonth. HSBC UK retail bank reported a net income of ? 988 million for 2009 as compared to ? 2,139 in 2008 registering a lessening of 54 % in net income earlier revenue enhancement as compared to old twelvemonth.

BARCLAYS BANK PLC AND HSBC BANK PLC

Barclays plc

Barclays logo.svg

Type

Public

LSE: A BARC

New york stock exchange: A BCS

Industry

Banking

Founded

1690

Headquarterss

Tower Hamlets, London, England, UK

Area served

Worldwide

Cardinal people

Marcus AgiusA

Chairman

BARCLAYS BANK PLC

“ Fluent In Finance ; Its Our Business to Know Your Business ” .

Barclays Plc is a fully fledged fiscal services group from United Kingdom. Its a Holding Company of Barclay Brand companies listed on London and New York stock, boulder clay 2008 it was besides listed on Tokyo Stock Exchange.

Barclays offer really broad portfolio of fiscal services under two word renowned concern bunchs: Global Retail Banking and Corporate Investment Banking and Wealth Management Services.

Barclays provides world-class services in Retail Banking, Credit Cards, Corporate Banking, Wealth Management and Investment Management around the Earth with an extended international presence in Europe, The Americas, Africa and Asia.

With 300 old ages of history and expertness in banking, Barclays operate in over 50 States employs around 1,44,000 people around the universe. The History of Barclays can be traced back to 1690, when two goldworker bankers viz. John Freame and Thomas Gould started merchandising on Lombard street, London.

Barclays has over 1800 UK high street subdivisions ( including former Woolwich subdivisions ) and it has besides joined up with the Post Office Ltd to supply personal banking services to clients who live near a Post Office subdivision and those who need fiscal services such as secured or unbarred loans. Worldwide, Barclays has over 4,750 subdivisions in over 50 states [ 47 ] . Most Barclays subdivisions have 24/7 ATMs. Barclays ‘ clients and clients of many other Bankss can utilize Barclays ATMs free of charge.

Barclays Capital is a strong investing arm owned by Barclays Bank PLC. Barclays Capital had created an investing financess concern that handles one million millions of lbs day-to-day, iShares. After much argument, Barclays president Bob Diamond, along with other Barclays foremans chose to sell the iShares concern to further hike capital. The preliminary monetary value for the concern is ?3billion, although Barclays has the flexibleness to sell at a higher monetary value, should a bidder show involvement before the merchandising deadline.

HSBC Holdings plc

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HSBC Holdings PLC logo

Type

Public

LSE: A HSBA

SEHK: A 005

New york stock exchange: A HBC

Euronext: A HSB

BSX: A 1077223879

Industry

Banking

Financial services

Investing services

Founded

Hong KongA ( 1865 )

Founder ( s )

Thomas Sutherland

Headquarterss

London, A United Kingdom [ 1 ]

Area served

Worldwide

Cardinal people

Stephen GreenA

GroupA Chairman

HSBC Bank PLC

“ The Worlds Local Bank ” .

HSBC Holdings Plc was incorporated in 1990, in England, and this was followed by alteration in its name from “ The Hong Kong and Shanghai Banking Corporation ” to HSBC and traveling its central offices to London in 1993.

The foundation of The Hong Kong and Shanghai Banking Corporation was laid in HongKong ( March ) and Shanghai ( April ) in 1865. Although the parent company HSBC retentions was established in 1990, when “ The HongKong and Shanghai Banking Corporation ” Purchased Midland Bank of UK, and its headquarter moved to London from HongKong as a status in the coup d’etat trade in 1993.

HSBCs stock is traded on London, NewYork, HongKong, Paris and Bermuda stock exchange.

HSBC is one of the Largest Banking and Financial Services administrations in the universe, portions in HSBC retentions plc are held by over 220,000 portion holders in 121 states. HSBC provides a comprehensive scope of fiscal services to more than 100 million clients through four clients an planetary concerns: Personal Financial Services ; Commercial banking: Global banking and Markets: private banking.

HSBC UK retail banking comprises two client groups, personal Financial services ( ‘PFS ‘ ) and commercial banking ( ‘CMB ‘ ) . UK personal Financial Services provides current history, nest eggs, personal loans, mortgages, cards, fiscal planning, every bit good as life and general insurance to UK personal clients through a assortment of distribution channels under assorted HSBC trade names, including First direct, Marks and Spencer money and partnership card.

As at 31 December 2009, the bank had 1,369 subdivisions in the United Kingdom.

Fiscal Performance and Interpretative Analysis

Barclays Bank PLC

Barclays delivered net net income for the twelvemonth of ?10,289m in 2009, an addition of 96 % on 2008. This included the BGI addition on sale of ?6,331m before revenue enhancement, and was achieved after absorbing: ?6,086m in writedowns on recognition market exposures ( including damage of ?1,669m ) , other Group damage of ?6,402m and a charge of ?1,820m associating to the tightening of ain recognition spreads. Net income included ?1,255m of additions on debt buy-backs and extinguishment.

Entire income grew 34 % to ?30,957m, and income from go oning operations grew 40 % to ?29,925m, with peculiarly strong growing in Barclays Capital. Within Global Retail and Commercial Banking ( GRCB ) , Barclaycard and GRCB -Western Europe besides reported good income growing. The aggregative gross public presentation of GRCB concerns was, nevertheless, affected by the impact of border compaction on sedimentation income as a consequence of the really low absolute degrees of involvement rates. Barclays Capital income was up 122 % compared to 2008. Top-line income rose by ?8,004m reflecting the successful integrating of the acquired Lehman Brothers North American

concerns, floaty market conditions observed across most fiscal markets in the first half of 2009 and a good comparative public presentation in the 2nd half of 2009 despite weaker markets. Income in Barclays Capital was impacted by writedowns of ?4,417m ( 2008: ?6,290m ) associating to recognition market exposures held in its trading books and by a charge of ?1,820m ( 2008: addition of ?1,663m ) associating to have recognition.

Entire operating disbursals increased 24 % to ?17,849m, but by 10 % less than the rate of addition in Group entire income. Operating disbursals from go oning operations increased 25 % to ?16,712m. Expenses in GRCB were good controlled, with the cost: income ratio bettering from 53 % to 52 % . Operating disbursals in Barclays Capital increased by ?2,818m to ?6,592m reflecting the inclusion of the acquired Lehman Brothers North American concerns. The Group entire cost: income ratio improved from 62 % to 58 % ( 57 % on a go oning footing ) . At Barclays Capital the compensation: income ratio improved from 44 % to 38 % .

Business Performance – Global Retail and Commercial Banking UK Retail Banking net income before revenue enhancement decreased 55 % to ?612m as economic conditions remained disputing. Income was down 11 % reflecting the impact of sedimentation border compaction cyberspace of hedges, partly offset by good growing in Home Finance. Entire loans and progresss to clients increased ?4.7bn to ?99.1bn. Gross new mortgage loaning was ?14.2bn during 2009 and net new mortgage loaning was ?5.7bn. The mean loan to value ratio of the mortgage book remained conservative at 43 % . Impairment charges increased 55 % due to the deteriorating economic environment. Operating disbursals continued to be tightly controlled and decreased 3 % reflecting a one-off recognition from the closing of the UK concluding wage pension strategy offset by a twelvemonth on twelvemonth addition in pension costs and

the non-recurrence of additions from the sale of belongings.

Barclays Commercial Bank net income before revenue enhancement decreased 41 % to ?749m. Income was loosely level on 2008 with good growing in net fees and committees offset by lower income from chief minutess. Net involvement income was loosely level as margin compaction on the sedimentation book was offset by higher loaning and sedimentation volumes. New term loaning extended to UK clients during 2009 was ?14bn. Operating disbursals were tightly controlled and fell 3 % driven by a one-off recognition from the closing of the UK concluding wage pension strategy partly offset by an addition in pensions and share-based payment costs and the non-recurrence of additions from the sale of belongings. Impairment charges increased to ?974m reflecting the impact of the weak concern environment with lifting default rates and falling plus values across all concern sections.

Barclaycard net income before revenue enhancement decreased 4 % to ?761m. Income growing of 26 % reflected strong growing across the concerns driven by increased loaning and improved borders. Average client assets increased 19 % to

?28.1bn.

Stockholders ‘ Equity

Share Holders Equity excepting non-controlling involvements, increased 35 % to ?55.9bn in 2009 driven by net income after revenue enhancement of ?10.3bn. Net touchable plus value increased by 53 % to ?47.1bn.

Balance Sheet

Entire assets decreased by ?674bn to ?1,379bn in 2009, chiefly reflecting motions in market rates and active decreases in derivative balances. Balances attributable to derivative assets and liabilities would hold been ?374bn lower ( 31st December 2008: ?917bn lower ) than reported under IFRS if sacking were permitted for assets and liabilities with the same counterparty or for which we hold hard currency collateral. Excluding this, assets and liabilities held under investing contracts, colony balances, good will and intangible assets, our adjusted sum touchable assets were ?969bn at 31st December 2009 ( 31st December 2008: ?1,027bn ) . On this footing, we calculate adjusted gross purchase, being the multiple of adjusted sum touchable assets over entire measure uping Tier 1

capital, every bit 20x as at 31st December ( 31st December 2008: 28x ) . Assets and hazard weighted assets were affected by the depreciation in value of assorted currencies relative to Sterling during 2009. As at 31st December 2009, the US Dollar and the Euro had depreciated 10 % and 7 % , severally, comparative to Sterling.

Capital Management

At 31st December 2009, on a Basel II footing, the Core Tier 1 ratio was 10.1 % ( 31st December 2008: 5.6 % ) and our Tier 1 ratio was 13.0 % ( 31st December 2008: 8.6 % ) . Capital ratios reflect a 12 % lessening ( ?51bn ) in hazard weighted assets to ?383bn in 2009. Key drivers included a decrease in the overall size of the balance sheet and foreign exchange motions.

Liquid

The liquidness pool held by the Group increased to ?127bn at 31st December 2009 from ?43bn at the terminal of 2008. Whilst support markets were hard, peculiarly in the first half of 2009, we were able to increase available liquidness and we extended the mean term of unbarred liabilities from 14 months to 26 months. We issued ?15bn tantamount in public senior unsecured debt markets, across multiple currencies and adulthoods. In add-on, we raised ?1.8bn equivalent in the covered bond market and issued ?21bn equivalent of structured notes. We have continued to pull off liquidness providentially in the visible radiation of market conditions and in expectancy of ongoing regulative developments

HSBC BANK PLC

The HSBC Group reported a pretax net income of 4014 million lbs as compared to 4366 million lbs in the twelvemonth 2008. The overall pretax net income addition was 45 % . There was a addition of353 million on the sale of the group ‘s London Headquarters edifice. In UK Retail Banking there was a loss of 179 million for HSBC Insurance ( UK ) Limited compared to a loss of 19 million in the twelvemonth 2008. Despite the economic system being in recession HSBC made 15 billion in residential mortgages and assisting 121000 concern startups in the commercial sector. The UK Retail Banking pretax net income fell by 63 per centum ; this was chiefly due to impairment in the economic environment. The Net Interest income decreased by 9 % driven by contracting of liability spreads, the bank nevertheless built a strong sedimentation base in 2009. Other runing income decreased by 89 per centum due to the income realized as a consequence of sale of MasterCard and visa portions in 2008 of 191 million. In Commercial Banking the loan damage charges rose by 285 million lbs reflecting a general economic downswing. The Net Interest Income increased by 15 % . The UK retail Banking reported a net income of 988 million lbs against 2139 million lbs in the twelvemonth 2008.. Excluding the losingss from HSBC Insurance and the accounting addition for some UK employee benefits in 2009, the UK Retail Banking pretax net incomes fell from 63 per centum. This was fundamentally due to higher damages in both personal and commercial sections due to the impairment of economic environment. The operating disbursals decreased by 8 per centum to 2968 million lbs as compared to 3214 million lbs in the twelvemonth 2008. The Net Fee Income remained about changeless in both 2008 and 2009, the the other runing income decreased by 89 per centum because of the income realized as a consequence of the portions of Master Card and Visa portions in 2008 of 191 million lbs non repeated in 2009.

The basic net incomes per portion ratio for 2009 for HSBC were US $ 0.34 which was a diminution of 17 % as compared to the ratio of 2008. In the twelvemonth 2009 the ratio on mean entire stockholder ‘s equity was 0.4 higher as compared to that in 2008. The entire dividend per portion growing for 2009 sums to US $ 0.34 per ordinary portion per centum ( Annual Report 2009 ) .

Share HOLDERS EQUITY

Stockholders equity increased 11.12 % to ?32,248million in 2009 as compared to ?28,985 in 2008.

Capital Management

The Core Tier 1 capital of the bank increased 26 % to ? 20,809 million in 2009 as compared to ? 15,568 in 2008, and the Tier 1 capital of the bank increased 23 % to ? 22,707 million in 2009 as compared to ? 17,523 in 2008.

SWOT ANALYSIS

BARCLAYS BANK PLC

Strength

Failing

Barclays is one of the UK ‘s largest Financial companies

Decrease in the Bankss subdivisions

Global diverseness in 60 states

Weak Private Clients public presentation

Excellent acquisition scheme that has expanded Barclays distribution base

Opportunity

Menace

Expansion in wealth direction and Private banking

Lack of cross-selling enterprises in wealth direction

Offering life, pension and varied investing merchandises to client baseA

Increased UK competition from uncluttering and mortgage Bankss

The proliferation of banking consolidation within the industry is and has created a new epoch of international banking pudding stones, peculiarly in the United States. The preceding is doing European based Bankss to look little in footings of comparative comparing. Barclays ‘ operation in a broad market economic system means it competes with equity funding for corporations and as such, this does non stand for a strength refering its overall public presentation base. The SWOT analysis identifies that Barclays ‘ public presentation underpinnings are represented by its scheme of geting other banking concerns to spread out its retail every bit good as other banking services through representation in international markets as represented by the bank ‘s presence in 60 states. This provides Barclays with the agencies to sell its extremely profitable investing banking services every bit good as be positioned to serve the cell of transnational companies that utilize its diverse banking fiscal service bundles.

HSBC BANK PLC

Strengths

The bank is good capitalised and this has enabled it to execute comparatively good against other Bankss in recent economic events.

The degree of capitalization agencies that, traveling frontward, the bank is improbable to necessitate to borrow from the UK authorities: this will enable it to retain more liberty.

The bank has a strong presence in emerging markets, seting it in a good place to take advantage of future growing in those economic systems.

The bank ‘s planetary presence in Europe, Asia and South America helps to distribute hazard and offers important economic systems of graduated table.

Failings

HSBC associates itself strongly with investing in the little concern sector, but the current economic state of affairs has led to increased hazards, potentially compromising the activity degrees in this country of the operation.

The bank was involved with sub-prime markets in the US and has had to compose off big figures lent to bad borrowers.

Despite falls in the UK involvement rate, HSBC has increased its mortgage rates. This may be perceived negatively by borrowers and possible borrowers, adds force per unit area to an already down lodging market and could finally take to more defaulting as borrowers struggle with higher refunds.

A redundancy programme announced late may impact morale among staff, taking to decreased production and trueness.

HSBC ‘s stigmatization emphasises its planetary presence, and this may be seen negatively by some clients in its deduction of homogenization and deficiency of personalisation.

Opportunities

HSBC ‘s high degree of capitalization topographic points it in a strong place to get assets

Banks happening trading conditions peculiarly hard at present may be available at low cost

HSBC ‘s by and large strong place presents the chance to surpass rivals during the economic downswing and to construct a repute for being one of the safer Bankss for depositors, assisting to increase resources for loaning.

Menaces

Trust in Bankss has decreased due to fiscal losingss suffered by investors, who may be more inclined to put elsewhere.

Fiscal losingss impacting Bankss and investors on a planetary graduated table have resulted in less recognition being available to clients. In the UK this is coupled with additions in life costs ensuing in less money being saved.

The falling belongings market has created a rise in Numberss of householders with negative equity. If a belongings is worth less than was borrowed to finance its purchase, there is small likeliness that the bank will reimburse all its losingss if proprietors default.

Claims have been made that HSBC has understated losingss ensuing from US sub-prime markets, and this could sabotage assurance in the bank.

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