Asian focus pays dividends for HSBC
● New boss John Flint describes latest results as ‘encouraging’
Banking major HSBC has reported a rise in third-quarter profit, driven by a strong showing from its retail and wealth management units.
The London-listed lender booked a 28 per cent increase in profit before tax to $5.9 billion (£4.5bn) for the three months to the end of September, reflecting strong revenue growth and lower operating expenses.
The results, which beat expectations, also showed that on an adjusted basis, pre-tax profit jumped 16 per cent to $6.2bn.
New chief executive John Flint, who took over in the top post in February, said: “These are encouraging results that demonstrate the revenue potential of HSBC.
“We are doing what we said we would – delivering growth from areas of strength, and investing in the business while keeping a strong grip on costs.
“We remain committed to growing profits, generating value for shareholders and improving the service we offer our customers around the world.”
HSBC cited growth in cur-
0 HSBC is Europe’s biggest bank but earns most of its profits from Asia
LAITH KHALAF, ANALYST
rent accounts, savings and deposits while wealth management saw higher investment revenue, reflecting increased investor confidence.
The lender has been grappling with cost control, and showed some success on that front, reporting a 7 per cent fall in operating expenses for the period.
HSBC is Europe’s biggest bank, but earns most of its profits from Asia. Last year, it completed a corporate overhaul to raise profitability by focusing more on
high-growth Asian emerging markets while shedding businesses and workers in other countries.
On 2 October, the bank announced a third interim dividend for 2018 of $0.10 per share.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said:“hsbcmaybethesecond biggest company on the UK stock market, but its profits are predominantly emanating from its historic home in the Far East.
“Three quarters of the bank’s profits so far this year have come from its Asian operations, leaving the European business trailing in its wake.
“Profit growth has been broad-based across HSBC’S main banking activities, and what’s positive is that it is coming from a rising top line rather than simply cost-cutting, which can only deliver results for so long. Indeed, adjusted operating costs have actually ticked up, though that’s to support investment in growth opportunities, notably in the bank’s digital proposition.
“As an international retail and commercial bank, HSBC is clearly plugged into the global economy, and in particular the fortunes of China and the surrounding area. While in the long term this looks like an ace in the sleeve, investors should expect a bumpy journey, particularly if Trump’s trade war dents growth in the region.”
Richard Hunter at Interactive Investor noted: “The tone has changed for the better at HSBC, where a renewed focus on Asia is beginning to bear fruit. The initial reaction to these numbers suggests some signs of optimism from investors. It may require further confirmation of a positive direction, however, before the current market consensus of the shares as a ‘hold’ is subject to material upgrades.”
“As an international bank, HSBC is clearly plugged into the global economy, and in particular the fortunes of China and the surrounding area”