HSBC 3Q Profit Rises 30%, Misses Estimates

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Nov. 04 (Bloomberg) -- James Ferguson, Founding Partner at Macro Strategy Partnership, discusses HSBC earnings, outlook and his subsequent investing strategy. He speaks on Bloomberg Television's “The Pulse.” (Source: Bloomberg)

James, in terms of what you make of hsbc, they didn't -- there is a solid set of numbers, they are going to see this broad-based recovery.

It is now gaining two percent.

It had a good initial reaction.

Most of the good news is coming from things like cost-cutting.

Capital for them was free in the sense that you didn't have to commit any capital.

That went for pretty much anything they could come up with that was slightly clever.

Now the regulator is cracking down on that.

You look at their medium-term plan.

Like the other banks, the main thing is cost-cutting.

Behind that cost-cutting is pulling out of all sort itself marginal businesses.

Where are they going?

If it is retrenchment elsewhere because of capital buffers, where the going?

All the stuff they are pulling out of is by definition unprofitable.

If you look at it on a term of equity basis, then all you are measuring is risk.

It may look great on the way up but all that is really doing -- on the way down, we are out.

What should the percentage be?

Good question.

We have seen bank of england rising reports recently read a take the capital to asset ratio all the way back to the agent hundred -- 1800's. those numbers were very high.

They have maybe 25% capital ratios under some measures.

There is no correct answer.

The real issue is that when you are going through a process to get more leverage, it looks great.

During the process where you're making banks scale back the leverage, that process looks like retrenchment.

The great secret is to try to get the balance right which we never do.

This is almost an emerging markets bank.

There has been a lot of strength in china.

They have been opening a lot of retail space in asia.

We had a guest on who said the big thing that markets are getting wrong is that there may be a huge correction in emerging markets.

That would drag hsbc down with it.

That is the big risk.

Hsbc had a good crisis.

The pain for hsbc was in there relatively new usss.

In the european markets, things have gone about average.

Where there were aided, when they went into the crisis, they had about 25% of their assets in asia.

That is where they come from.

Because they pulled out of the u.s. and had zero growth in the u.k., then obviously the asian side has become more important.

That is obviously an area of risk going forward.

There will come a stage at which being the good solid reliable bank with potential forward risk is an issue.

So boring is good.

Boring is good in banking.

Except we have quite a lot of scandals.

I have no idea at this moment how big that could become.

Libor was set by every small number of banks.

It was a small number of people.

Fx is huge.

I struggle at the moment to see what on earth it can be on fx.

Those markets are so enormous.

The real interesting thing is, this is the regulator trying to get their money back.

We have poured huge amount of taxpayer money into banks.

Now we want our money back.

A lot of them are making illegalities which weren't necessarily considered totally illegal before the event.

It is still not it.

It was arguably in favor.

Who is the victim?

They are not really making it clear who the victim was.

This is normally bad behavior.

James, we will see what it ends up to be.

Coming up on the program -- a big bet on small autos.

We will tell you where diagei is banking on a new round of johnny walker drinks.

This text has been automatically generated. It may not be 100% accurate.

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