Asia pivot helps HSBC post jump in Q3 pre-tax profit


  • Banking
  • Monday, 30 Oct 2017

HONG KONG: HSBC Holdings Plc on Monday signalled its pivot to Asia was paying rich dividends as quarterly profits leapt almost five-fold, creating a foundation for its new leadership to plan for growth after a tough period of post-crisis restructuring.

HSBC earlier this month chose veteran John Flint as its next chief executive, with its newly arrived chairman promoting an insider to drive revenue growth. Flint will take over as CEO in February next year.

With Flint, who spent much of his early carer in Asia, and regional veteran chairman Mark Tucker at the helm, analysts expect the London-based bank’s shift toward its second home market of Asia to accelerate.

HSBC has been able to grow its revenue again following a period of wider restructuring after the 2008 global financial crisis, that included scaling back its empire and shifting its focus eastwards.

Pre-tax profit was US$4.6 billion in the September quarter, up from US$843 million in the same period a year ago, HSBC said in a stock exchange filing. The profit was roughly in line with analyst estimates of US$4.7 billion.

The year-ago profit was significantly impacted by a one-off loss of US$1.7 billion from the sale of its Brazilian unit, and adverse foreign currency movements.

On an adjusted basis - excluding any significant, one-time item - pre-tax profit dropped 1.4% due to higher operating expenses, the result of greater investments.

Reported pre-tax profit for the Asia operations rose 10% during the third quarter to US$4 billion, while Europe narrowed its loss to US$50 million from US$1.6 billion in the year-ago period.

“Our international network continued to deliver strong growth... and our pivot to Asia is driving higher returns and lending growth, particularly in Hong Kong,” HSBC group chief executive Stuart Gulliver said in the statement.

PEARL RIVER PIVOT 

HSBC has been able to boost its capital buffer despite rolling out share buybacks, the latest of up to US$2 billion in July, and sustaining dividends, showing it is ahead on its turnaround strategy that includes expanding in Asia.

The bank makes more than half of its profits in Asia, and its regional pivot is centred on China’s Pearl River Delta region with billions in investment commitments and plans to bolster its retail and wealth management business.

Its customer base for retail banking and wealth management in mainland China had expanded by more than 70% so far this year, it said.

HSBC’s common equity tier 1 ratio - a measure of financial strength - was 14.6% at the end of September, slightly lower than 14.7% at end-June this year, but in line with analyst expectations.

The ratio is set to increase in the medium term, as the bank repatriates about US$8 billion stuck at its US subsidiary, following approval last year from the US Federal Reserve.

HSBC posted a 5% drop in adjusted revenue in fixed income, currencies and commodities (FICC) business during the quarter. Some of its European rivals such as Barclays saw the same business decline by more than 20% in the period.

Hong Kong shares of HSBC were up 0.5% at HK$77.50, slightly ahead of the broader Hong Kong stock index, after the results. - Reuters

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