The Positives
+ Noninterest income grew 19% YoY. Total noninterest income growth came mainly from (a) higher net gains from trading activities (+29% YoY) reflecting market conditions, (b) higher investment banking fees (+70%), (c) an increase in investment advisory fees and brokerage. commissions (+11% YoY) from higher asset-based fees reflecting higher market valuations, (d) higher deposit and lending-related fees (+7% YoY) from higher deposit-related fees, and (e) an increase in all other noninterest income which included the impact from the adoption of a new accounting standard for renewable energy tax credit investments, and improved results from the group’s venture capital investments.
+ Investment banking growth lifted CIB revenue. Corporate and investment banking revenue rose 4% YoY to US$4.8bn, mainly from investment banking fees, which rose 38% YoY from increased activity across all products and higher markets revenue (+16% YoY)
driven by higher revenue in equities, structured products, and credit products, partially offset by lower revenue in rates products. However, this was offset by lower treasury management revenue from the impact of higher interest rates on deposit costs and lower
Commercial Real Estate (CRE) revenue, including lower loan balances, partially offset by higher commercial mortgage-backed securities volumes.
+ Provisions fell 28% YoY. Provisions for credit losses fell 28% YoY to US$1,236mn, which includes net charge-offs of US$1.3bn and allowance for credit losses of -US$67mn (2Q23: net charge-offs of US$764mn and allowance of credit losses of US$949mn). The decline in allowance for credit losses was across most asset classes, partially offset by a higher allowance for credit card loans. Net charge-offs rose 71% YoY due to an increase in CRE, credit card, and commercial & industrial, partially offset by a decline in auto. The total net charge-off ratio rose 25bps YoY to 0.57%.
The Negatives
– NII continues to decline. NII fell 9% YoY to US$11.9bn due to the impact of higher interest rates on funding costs, including the impact of lower deposit balances and customer migration to higher-yielding deposit products, higher deposit costs, and lower loan balances, partially offset by higher yields on earning assets. NIMs fell by 34bps YoY and 6bps QoQ to 2.75% as the rise in deposit costs (+80bps YoY) outpaced the growth in loan yield (+37bps YoY). Average loans fell 3% YoY, with declines across most loan categories, partially offset by higher credit card loan balances.
– Expenses up 2% YoY. Noninterest expense rose 2% YoY to US$13.3bn, mainly from higher operating losses (+113%) driven by customer remediation accruals for historical matters, higher non-personnel expenses (+1%) from higher technology amortization, occupancy expense, and advertising and promotion expense, partially offset by lower professional and outside services expense. Personnel expense, which makes up 65% of total noninterest expense, was flat due to the impact of efficiency initiatives, largely offset by higher revenuerelated compensation expense.
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Glenn covers the Banking and Finance sector. He has had 3 years of experience as a Credit Analyst in a Bank, where he prepared credit proposals by conducting consistent critical analysis on the business, market, country and financial information. Glenn graduated with a Bachelor of Business Management from the University of Queensland with a double major in International Business and Human Resources.
