HSBC reported higher pretax profit because they charged more interest and collected more fees. A bank made money by banking. Analysts are calling it a beat.
The estimates were wrong. That's the story. A room full of professionals with Bloomberg terminals and finance degrees predicted a number. The number came in higher. Now we're supposed to care that their guess was bad.
Net interest income went up because rates exist and HSBC lends money at those rates. Fees went up because people paid them. This is not a business model innovation. This is a bank operating as a bank since the concept of banking was invented. Mesopotamians understood this.
Retail traders are now scanning HSBC's technical chart looking for a cup-and-handle pattern or some Fibonacci retracement level that will tell them the future. The future is that HSBC will continue charging interest and fees until it stops being a bank. That is the entire forecast.
The headline treats "beats estimates" like an achievement. HSBC did not beat anything. Analysts underestimated. That's a failure of estimation, not a triumph of banking. If I guess you're five feet tall and you're actually five-foot-two, you didn't accomplish height.
Every earnings season the same thing happens. Companies report numbers. Analysts act surprised their guesses were wrong. Financial media prints the word "beats" or "misses" as if the estimate was handed down from a mountain. The estimate was made by Brad in equity research who got promoted too fast.
HSBC charged interest on loans and took a cut of transactions. Somewhere a day trader is now convinced this means the stock will gap up exactly 4.7% by next Thursday and he's risking his grocery money on it.
Photo by Rubaitul Azad on Unsplash
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