HSBC in a Class of Its Own: Burrows

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Nov. 04 (Bloomberg) -- Olly Burrows, Senior Analyst of Banks and Credit Research of Rabobank, discuses HSBC earnings and RBS ‘bad bank’ actions. He speaks on Bloomberg Television’s “On The Move.” (Source: Bloomberg)

Reducing cost.

The strategy seems to be online.

You're optimistic about hsbc.

Hsbc is a bank that is far ahead of its u.k. competitors.

It is in a class of its own.

It strategy seems to work.

It is not just focusing on europe.

Although it is not as good as the old days where they used to be a tripod across the globe, particularly in the americas and asia and europe.

That has broken up quite a bit now.

Nevertheless, it strategy works.

A bank that is focused on trade finance is very profitable.

That seems to be the limit of its problems, its attention on cost.

It doesn't phase a lot of headwind.

Hsbc stands apart.

Of course they have regulations.

The capital ratio seem in good form.

We don't exactly know what we are facing.

We are also facing all of this possible litigation and scandal involving currencies.

We still don't really know exactly what the affect probes are.

There are a lot of negative headlines about people being kept at home, etc.

We need to find out more about that.

Yes, hsbc has nevertheless not been involved in quite so many scandals as its peers.

They had a bit of a blip with some money laundering last year.

That seems to be put to bed.

In this regulatory agency we live in, there are many regulators now and so many people poring over books of banks now.

You are potentially going to find more problems in general.

That is why many of the scandals have come to light.

There is so much closer scrutiny now than there was before the crisis.

There is one thing that you could say about hsbc -- if we do have a big correction in emerging markets, because of its strong presence there, could that make it lose?

It is not really my forte.

I wouldn't think that that was a problem.

The sentiment is, are you in a safe pair of hands with hsbc?

It is always at the top of everybody's core holdings.

It has that diversification which plays well.

If asia is weak, then it has got europe and the americas to fall back on.

Talk to me about rbs.

We had to this news on friday about them creating a bad bank within the bank.

This seems to be a little bit windowdressing.

It is a bit of a halfway measure between what exists today and the idea of completely splitting out all the bad assets into a bad bank.

If you were to split out the bad assets, you would have to crystallize the losses.

Therefore, plug the capitals.

That would create -- with an internal bad bank, those losses will come.

They have said those losses and impairments will be recognized.

As they start to run down that program, it is deferring over a slightly longer period as opposed to an abrupt recognizing of losses.

It is a compromise but a realistic one.

It is good for the bank and a sensible process.

Nice to see they are taking an approach that isn't just damaging.

Thank you so much for that.

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