HSBC Profits Surge From More Released Loan Loss Reserves

A continued reduction of credit loss provisions fuelled HSBC’s pre-tax profits in the third quarter to comfortably beat analyst expectations.

HSBC registered $5.4 billion of pre-tax profits in the third quarter, according to its latest earnings report, marking a 76 percent year-on-year growth.

This marked significant outperformance compared to analysts’ forecasts of $3.78 billion, according to compilations from the bank.

All regions were profitable including Asia which recorded $3.3 billion of pre-tax gains, a 3.6 percent increase.

Although reported revenue was up just a modest 1 percent to $12 billion, the bank managed to generate strong results through the reduction of loan loss reserves.

In the third quarter, HSBC made a net release of $700 million in expected credit losses (ECL) compared to an ECL charge of $800 million in the same quarter last year.

We had a good third-quarter performance, with strong growth in profits supported by additional credit provision releases, said HSBC CEO Noel Quinn. Our strategy remains on track, with good delivery in all areas. This was reflected in more consistent top-line growth, robust lending pipelines across our businesses, and rising trade and mortgage balances.

The bank also highlighted a sufficiently strong capital position to prepare for share buybacks totaling up to $2 billion.

While we retain a cautious outlook on the external risk environment, we believe that the lows of recent quarters are behind us, Quinn said. This confidence, together with our strong capital position, enables us to announce a share buyback which we expect to commence shortly.