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HSBC revenue growth exceeds expectations

HSBC revenue growth exceeds expectations

By Hudson Lockett in Hong Kong

Revenue at HSBC climbed more than expected in the third quarter of 2017 as deposit income rose across the bank’s three main global businesses.

The UK’s largest listed bank on Monday said third-quarter pre-tax profit fell 1 per cent year on year to $5.4bn after adjusting for one-offs and currency moves, coming in below consensus forecasts for a marginal rise. Earnings per share of 15 cents for the quarter were also just shy of expectations.

But adjusted revenue for the third quarter rose 2 per cent to $13bn, beating an average broker estimate of $12.7bn compiled by HSBC. The bank attributed the growth for the year to date to higher deposit income and wider spreads in Asia for its retail banking and wealth management and commercial banking division, as well as higher revenues for businesses at its global banking and markets division.

HSBC posted $14.9bn in reported pre-tax profits for the year to September, up 41 per cent from the same period last year, boosted by a solid set of results for the first half of this year. Adjusted profits before tax for the period rose 8 per cent to $17.4bn.

“We maintained good momentum in the third quarter, with higher revenue in our three main global businesses,” said Stuart Gulliver, outgoing chief executive. Mr Gulliver attributed the slight decline in adjusted profits for the quarter to increased operating expenses resulting from accelerated investment in business growth.

HSBC’s common equity tier 1 ratio, a key measure of the bank’s strength, stood at 14.6 per cent at the end of the third quarter, down fractionally from the second quarter but still well up from a year earlier.

The quarterly earnings are the first since Mark Tucker, formerly the chief executive of Asia-focused insurer AIA, became the first outsider to assume the role of chairman at HSBC since the bank was founded 152 years ago.

After weathering a number of crises during their tenure, including an embarrassing private banking scandal, Mr Gulliver and former chairman Douglas Flint steered the bank through a number of sweeping reforms focused on its investment banking division.

Many analysts say those efforts are beginning to pay off.

HSBC said that as of October 26 it had completed 71 per cent of the $2bn share buyback announced in July. It also highlighted progress in its pivot to Asia, where it said returns drove more than 70 per cent of adjusted pre-tax profit for the group in the nine months through September.

The group’s third-quarter earnings report is the first since the bank named John Flint, the head of HSBC’s retail and wealth management arm, as its next chief executive, replacing Mr Gulliver in February.

Mr Flint, an HSBC lifer with almost three decades at the bank, is viewed by analysts as a safe pair of hands and is expected to exert a moderating influence on Mr Tucker, whose leadership at AIA spurred a 50 per cent jump in revenues and profits.

The bank’s Hong Kong-listed shares have rallied more than 32 per cent since the start of the year, trading at HK$77.95 on Monday morning shortly before the results announcement. The stock was up 0.5 per cent at HK$77.50 in early afternoon trading.

Shares in London closed at 748.3p on Friday, up almost 26 per cent from their 2017 low in April.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from and redistribute by email or post to the web.


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