HSBC posts 32% surge in Q3 profit
Updated: 2015-11-03 08:07
By Bloomberg in Hong Kong(HK Edition)
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Global banking giant HSBC Holdings Plc - Europe's largest lender - reported on Monday a bigger-than-estimated jump in third-quarter profit as costs related to fines and legal settlements declined.
Pretax profit rose by 32 percent to $6.1 billion from $4.6 billion a year earlier as operating costs fell, the London-based lender said. Earnings on that basis exceeded the $5.2-billion average estimate of 14 analysts compiled by the bank. HSBC reiterated that a decision on its domicile may not come until next year.
Group Chief Executive of HSBC Holdings Plc Stuart Gulliver unveiled a three-year plan in June to pare back a sprawling global network, shut money-losing businesses and eliminate as many as 25,000 jobs after compliance costs surged. The third-quarter result benefited from a $1.4-billion decline from a year earlier in fines, settlements and redress for UK customers, while weakness in revenue capped earnings.
"The outlook for HSBC has become less negative," said Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong, adding that a turnaround in the bank's performance isn't yet assured.
HSBC's shares in Hong Kong fell 1.15 percent at the close of Monday, compared with the benchmark Hang Seng Index's 0.9-percent decline. The stock has fallen 18 percent so far this year.
Operating costs decreased 19 percent from a year earlier to $9 billion. That was below analysts' average forecasts of $9.4 billion. While net operating income fell 4 percent to $15.1 billion, that exceeded an average estimate of $14.8 billion.
"Our cost-reduction measures are beginning to have an impact," Gulliver said. "There is more to achieve on costs and we expect the measures we have already taken to have a further impact in the fourth quarter."
The bank, which has been generating more than two-thirds of its earnings in Asia, is assessing whether to move its headquarters away from London. Pretax profit in Asia rose 2 percent to $3.5 billion in the quarter from a year earlier.
HSBC said on Monday "a considerable amount of work" remains for deciding on its domicile and a decision may not come this year. The bank may provide an update on the deliberations "if necessary" when it publishes its full-year results in February, it said.
Gulliver said Oct 16 the decision "can't slip too far" because it's disruptive for staff.
Since taking over in 2011, Gulliver has announced more than 87,000 job cuts, exited about 78 businesses and is close to finalizing the sales of its operations in Turkey and Brazil. In the UK, as many as 8,000 jobs will be cut.
HSBC reduced its risk-weighted assets by another $32 billion and is almost 30 percent of the way toward its target of reducing those assets by $290 billion by the end of 2017, Gulliver said.
HSBC reported a common equity Tier 1 capital ratio, a measure of financial strength, of 11.8 percent - up from 11.6 percent in the first half.
The bank's provisions for souring loans fell 16 percent to $638 million in the quarter from a year earlier. Return on equity, a measure of profitability, was 10.9 percent for the third quarter, up from 7.2 percent a year earlier.
(HK Edition 11/03/2015 page7)