HSBC's loan growth dips 1.8% QoQ in 3Q14

NIM is stable, meanwhile.

Excluding exchange rate impact, it has been reported that HSBC's total loans grew 1.5% QoQ in 3Q14, up 5.4% HoH in 1H14.

According to a research note from Maybank Kim Eng, however, reported loan growth fell 1.8% QoQ in 3Q14.

With potential appreciation of USD against Euro and Asian currencies, Maybank Kim Eng cut its loan growth forecast to 6% p.a. for 2014-16 from 8% p.a.

Meanwhile, NIM has remained stable since 2Q14 (1.95% in 1H14) given higher yields on surplus liquidity.

The bank’s management expects potential rate hikes will offset the negative impact of continued run-down of high-yield loans and shift towards low-yield secured lending.

Maybank Kim Eng has raised its NIM forecasts to 1.94% for 2015-16 from 1.83-1.89%.

Here's more from Maybank Kim Eng:

Raise underlying CIR target. Underlying cost-income ratio (CIR) was 62.5% in 9M14, up from 57.1% in 9M13.

Apart from new regulatory costs, there was a continued rise in risk and compliance-related expenses (+USD0.4b in 3Q14 vs USD0.3b in 1H14). This has offset sustainable cost savings of USD0.9b during 9M14.

Management expects its CIR will remain close to 60% by 2016 given the continued rise in risk and compliance-related expenses.

We thus raise our expense CAGR to 1.7% for 2013-16 from 0.5%. Additional regulatory costs to offset benign asset quality.

Credit costs fell to 29bps in 3Q14. In view of continued shift towards secured loans, we cut our credit cost forecasts to 36-37bps for 2015-16 from 41-42bps. Still, the foreign exchange investigation of FCA has not been settled.

There could also be penalty related to tax evasion of certain customers of HSBC Private Bank (Suisse). We project additional regulatory costs of USD772m in 2015.