By Claire West
HSBC and BNP Paribas have both improved on earnings forecasts, as bad debts fell to compensate for slowing investment banking growth. Both saw a decline in income from investment banking in the latest quarter, which recalls the performance of US and European banks in the wake of the euro-zone debt crisis. Their increased profits and lower losses have eased concerns of a global economic slowdown.
Half year profits for HSBC came to $11.1 billion (£7 billion), while BNP Paribas exceeded forecasts with a net profit of 2.1 billion euros, a rise of 31%. The reports are good news for the economy after Federal Reserve Chairman Alan Greenspan said that slowing growth and a fall in housing activity risked a double-dip recession.
Credit-default swaps on HSBC fell by 1 basis point to 81, and contracts on BNP Paribas fell by 3 to 84. A basis point on a credit-defaulty swap contract protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros per year.
Credit default swaps pay the buyer face value, in exchange for any underlying secruities or the same amount in cash when a company fails to meet its debt agreements. The lower number of credit default swaps indicates a more positive attitude towards credit quality.
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