Rising costs tarnish HSBC's Asia-driven profit growth

31 October, 2017, 00:47 | Author: Pamela Mathis
  • HSBC third-quarter profits up five times

For the three months to the end of September, HSBC reported quarterly profits of $4.6bn (£3.5bn), up 448 per cent from $843m at the same point past year.

Nevertheless, the comparable 2016 figure had been negatively affected by one-off factors such as huge writedowns and restructuring charges.

In the first half of this year , the bank beat estimates with a pre-tax profit of $10.24 billion and revenue of $26.1 billion - a performance that helped HSBC shares climb in all three listings. The massive jump came weeks after a new chief executive was unveiled as part of a management overhaul that has seen the banking behemoth deal with costly write-downs.

Analysts said the third-quarter numbers were better than expected.

"HSBC has had to spend a lot of money to hire more lawyers to help it fix legal problems and enhance its compliance department", said Kingston Securities Executive Director Dickie Wong, adding that it may still feel the effects of legal challenges and expenses.

Asia loans and advances grew 17% in the three months to September 30, compared with the third quarter of 2016.

Mr Flint joined the lender as an worldwide officer in 1989, having spent the first 14 years of his career in Asia, helping to establish and expand the bank's global markets business in the region before moving back to London in 2004.

"Our global network continued to deliver strong growth in the third quarter, and our pivot to Asia is driving higher returns and lending growth, particularly in Hong Kong", Gulliver said in a statement. In a statement to the Hong Kong stock exchange the bank said that its "pivot to Asia" had driven over 70 per cent of the group's adjusted profit in the first nine months of this year.

The bank's strategy of expanding operations in the Pearl River Delta, an area of southern China where major cities such as Hong Kong and Guangzhou are situated, "is starting to obviously bear fruit for our shareholders", the chief executive told a press conference in London.

Net adjusted profits at HSBC's retail banking and wealth management division were up 11 per cent in the third quarter from a year earlier.

"Regionally, it's Asia which is doing the heavy lifting for HSBC (.) its business primarily resides in the far east", said Laith Khalaf, analyst at stockbroker Hargreaves Lansdown.

Revenue for FICC, which makes up the largest portion of the bank's global markets business, fell 6% to US$1.35bn due to lower market volatility.

HSBC is able to move "up to 1,000" employees to France, he added, where it has been operating for nearly two decades.

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



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