HSBC sees 34% decline in FX revenues dragging down Q2 results

A sustained period of low volumes that has continued into the second half of 2014 has not just plagued retail FX firms and non-bank institutions.

It has become very much apparent that the banking giants which dominate the world’s electronic trading business are also succumbing to volume stagnation, as depicted by HSBC’s 34% downturn in FX revenues during the second quarter of this year which was reported in the bank’s first-half interim results today.

HSBC, one of the world’s largest financial institutions and a prominent FX dealer, reported just $631 million in FX revenues in the second quarter, whilst revenues also fell in equities trading, down 22% year-on-year to $247 million.

These troublesome results had affected many banks during the first half of this year, with London’s interbank FX segment being at the center of it. Earlier this year, LeapRate reported that Barclays was planning to make an almost unimaginable 19,000 redundancies globally, some of whom were in the firm’s trading desks.

At the time, LeapRate also detailed that Barclays FX traders in London are generally in receipt of higher remuneration packages than their peers at HSBC and RBS, and that there is a general consensus that RBS and HSBC offer poorer packages to their traders, despite far better corporate performance.

The corporate performance of HSBC has now begun to go the way of Barclays, which perhaps shows that the traders receiving higher remuneration at rival firms that were not performing may have understood that the global slowdown in FX volumes would affect all companies, therefore better to stay put.

In HSBC’s case, however, the point of interest that is evident in the release of its second quarter results is that trading revenues in other asset classes has increased, emphasizing the dynamic that it is FX revenues that are being affected this year rather than those of other trading activity.

Second-quarter credit trading revenues rose 34% year-on-year to $246 million, while revenues from rates were up 32% at $496 million, however FX represents the largest part of the British bank’s trading business, the downturn of which having eradicated any positive overall revenues generated by other asset classes.

According to HSBC, the decline in FX revenues reflected “lower market volatility and reduced client flows” as it blamed FX for a 12% drop in markets revenues over the second quarter and a 7% decline in the business’ revenues over the first half of the year.

Markets revenues totalled $1.6 billion versus $1.8 billion in the second quarter last year.


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