HSBC profits flat in third quarter as Gulliver's jaws turn negative

31 October, 2017, 00:44 | Author: Warren Cooper
  • HSBC third-quarter profits up five times

"Our pivot to Asia is driving higher returns and lending growth, particularly in Hong Kong and the Pearl River Delta", said Gulliver, referring to the affluent industrialized region in southern China's Guangdong province.

HSBC's gradual shift towards Asia showed signs of paying off on Monday, as the global bank posted an nearly five-fold increase in profits for the most recent quarter, broadly meeting analyst expectations.

After adjusting for the one-off items, HSBC's profits for the third quarter of this year came in at US$5.44 billion, 1.8 per cent lower than the same period last year, but better than expectations.

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 London-based global bank said pretax profit rose to US$4.6 billion in July to September, an over fivefold rise from US$843 million a year ago.

Outgoing chief executive Stuart Gulliver said: "Our global network continued to deliver strong growth in the third quarter, and our pivot to Asia is driving higher returns and lending growth, particularly in Hong Kong".

Shares of HSBC were down 0.3 percent to close at 76.85 HK dollars on Monday.

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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At the bottom line, the bank turned in a third-quarter net profit of US$2.96 billion, compared with a year-earlier loss of US$617 million, when the HSBC took a massive hit on the sale of its operations in Brazil.

Gulliver is stepping down as CEO after full-year results are released at the end of February, and he expects his successor John Flint to remain focused on getting "positive jaws" - increasing revenues faster than costs.

"We won't achieve 10 percent by the end of 2017, but we are heading in the right direction", Mackay said.

The bank has also been able to keep capital buffers as well as dividends despite many rounds of buyback programs for shares. HSBC says profits rose in the third quarter as its sweeping corporate overhaul, aimed at winning more business in Asia, pays off.

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

In global banking - which includes securities services, global liquidity and cash management, global trade and receivables finance and investment banking - revenues of $943m were down 5% year-on-year.

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

The company also reported that in the nine months to the end of September it had spent £12m on costs associated with the UK's exit from the European Union.

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