HSBC Posts 24 Percent Profit Drop

HSBC posted a 24 percent drop in third-quarter profits despite a «resilient» Hong Kong business that managed to offset the city’s technical recession.

The bank reported profits of $2.97 billion in the three months ended September 30, compared to $3.89 billion in the same period last year. HSBC’s pre-tax profits reached $4.84 billion, down 18 percent and below consensus estimates of $5.29 billion.

In addition to a 2.9 percent decrease in revenue, primarily driven by lower global market activities, the bank also accounted for a number of provisions and one-off costs including a customer redress provision of $606 million, severance costs totalling $120 million and an expected credit loss provision of $400 million, mainly for unsecured retail lending and higher charges in its U.K. and Hong Kong commercial banking business.

Despite the global results, the bank reportedly remained «resilient» in Hong Kong despite the headwinds. HSBC’s Hong Kong business registered a 1.3 percent uptick in adjusted pre-tax profits to reach $3.02 billion and push Asia’s pre-tax profits up 4 percent to $4.7 billion.

Parts of our business, especially Asia, held up well in a challenging environment in the third quarter, said HSBC’s interim CEO, Noel Quinn.

However, Quinn called performance elsewhere «not acceptable» underlining business activities within continental Europe and the non-ring-fenced bank in the U.K. and the U.S.

Our previous plans are no longer sufficient to improve performance for these businesses, given the softer outlook for revenue growth. We are, therefore, accelerating plans to remodel them, and move capital into higher growth and return opportunities, he said, adding that the bank would not longer reach its return on tangible equity target of more than 11 percent in 2020.