Fall in litigation charges, costs help growth in HSBC revenue
LONDON: HSBC beat analysts’ third-quarter profit estimates, as costs and litigation charges declined at a faster pace than revenue, with Europe’s largest lender saying it may need more time to determine whether to move its headquarters from London.
Pretax profit rose to $6.1 billion from $4.6 billion a year earlier, London-based HSBC said in a statement on Monday. That beat the $5.2 billion average estimate of 14 analysts compiled by the bank. Operating costs fell 19 per cent to $9 billion, offsetting a 4.4 per cent drop in revenue to $15.1 billion, hurt by turmoil across Asian markets.
Chief executive officer Stuart Gulliver, 56, unveiled a threeyear 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, set- tlements and redress for UK customers. HSBC said the board requested “further information” as it seeks to take a decision on whether to move headquarters abroad, with a further update planned for early 2016.
“HSBC’s reassuring dullness shines through,” said Ian Gordon, an analyst at Investec with a buy rating on the stock. “Revenue weakness was concentrated in retail banking and wealth management and the investment bank, but strong cost and impairment performances delivered a resilient result which, in a challenging quarter for UK banks, offers modest encouragement.”
Challenging conditions
HSBC shares fell 0.6 per cent to 504.60 pence at 8:16 a.m. in London. They have dropped about 17 per cent this year after decreasing 8 per cent in 2014.
At the retail banking and wealth management division, adjusted pretax profit fell to $1.5 bil- lion from $2.1 billion a year earlier. In global banking and markets, which houses the investment bank, profit was little changed at $2 billion, while revenue fell 20 per cent after “challenging market conditions” slashed rates and credit trading volumes. Global private banking reported a drop of 96 per cent to $8 million.
Asia profit
The bank, which has been generating most of its earnings in Asia, is assessing whether to move its headquarters away from London, partly because of increasing taxes and some of the strictest bank regulations in the world. Among the criteria listed as part of its assessment are also economic growth and long-term stability.
Pretax profit in Asia rose 2 per cent to $3.5 billion in the quarter from a year earlier and impairments on bad loans fell 16 per cent to $638 million. HSBC reduced its risk-weighted assets by another $32 billion.