HSBC reports mixed third-quarter results

In a statement to the Hong Kong stock exchange the bank said that its "pivot to Asia" had driven over 70 per cent of the group's adjusted profit in the first nine months of this year.

HSBC saw return on equity, a key measure of profitability, nearly double to 8.2 percent in the first nine months of the year but it did not give a timeframe for achieving its long-term goal of 10 percent.

The strong results came despite the bank booking more than $770m of exceptional costs for the quarter, including $101m spent on setting up a ring-fenced United Kingdom retail bank to comply with new regulations.

The bank's third-quarter pre-tax profit was $4.62 billion, surging from $843 million in the same period a year ago.

"We maintained good momentum in the third quarter, with higher revenue in our three main global businesses", said chief executive Stuart Gulliver.

HSBC highlighted strong performance from its global network and good contributions from its Hong Kong and Asia businesses. He will be replaced by John Flint, now head of the bank's retail and wealth management arm, the company said earlier this month.

With Flint, who spent much of his early career in Asia, at the helm, alongside chairman Mark Tucker, who has also worked extensively in the region, analysts expect the bank to accelerate its push into Asia.

He added: "Although operational performance at HSBC is clearly improving, we believe that the shares have already run well ahead of what can be justified by current estimates and are already factoring in significant upgrades with returns well in excess of management targets".

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Adjusted profit in HSBC's global banking and markets division dipped 3% to US$1.54bn, but it fared better than rivals in most areas.

According to the company, growth in loans and advances translated into higher adjusted revenue in all three main global businesses. Finance head, Iain Mackay, said balances there had grown to over $1 billion from "a very small base".

This will help bolster the bank's CET1 ratio and will also support further share buybacks, which has buttressed its share price in recent months.

Asia was an important driver for growth in insurance, wealth management, and loans, said the bank.

While Gulliver said the bank's "assumption of a pretty hard Brexit" had not changed, he estimated the overall cost of Brexit to HSBC in coming years would be around "US$200 million to US$300 million".

Revenue for the quarter climbed 36 percent to $12.98 billion from prior year's $9.51 billion.

The bank could end up moving fewer than 1,000 jobs to Paris following Britain's exit from the European Union, Mackay told reporters on a conference call, following previous remarks from senior bank executives suggesting that many roles would move.

  • Stacy Houston