HSBC quarterly profit jumps but revenue misses estimates, shares slide 6pc

HSBC (0005) on Tuesday reported a jump in quarterly profit, but revenue came in below estimates in part due to slower growth at its wealth business, dragging down shares in the lender by nearly 6 percent.

Europe's largest bank reported pretax profit surged 32 percent to US$9.6 billion (HK$74.88 billion) for the July–September quarter, in line with estimates, and launched a share buyback of up to US$1 billion, the same amount as the previous quarter.

But revenue undershot analyst forecasts for US$19 billion with growth of 5 percent to US$18.6 billion. Net interest income rose 6 percent to US$9.3billion

The slide in the bank's Hong Kong-listed shares underscores how recent strong results from European lenders have increased investors' expectations for performance, even as the impact of the Iran war on inflation and interest rates makes the environment for banks tougher. The shares remain up 9 percent for the year to date.

"There is sometimes a market expectation that we upgrade guidance or targets," CFO Pam Kaur told reporters on a conference call when asked about the share drop. The bank expressed confidence in achieving the full-year target of its banking net interest income of at least US$46 billion.

Revenue for HSBC's wealth division was flat at US$2.7 billion. That compared with 15 percent and 23 percent year-on-year revenue growth in the first two quarters.

Analysts at Citi and Jefferies said the results were slightly underwhelming, though both said underlying trends in HSBC's wealth balances and private banking suggested the business performance was healthier than the top-line revenue figure suggested.

BRITAIN'S BANKS POISED FOR TAX HIKES

HSBC benefited from the absence of legal provisions booked in the same quarter a year earlier. It also said expected credit losses tumbled 17 percent to US$800 million, thanks to a reduction in charges linked to Hong Kong's real estate sector as well as its UK and Mexican wealth businesses.

Alongside the recovery in Hong Kong's residential property market, office leasing in core Central district has picked up, while other areas are still struggling, Kaur said, adding that pressure on the city's asset quality from commercial real estate exposures has eased.

Responding to Beijing's tightened cross-border investment rules and offshore income taxation, HSBC said it had not seen any material impact on customers' investment activity so far, with HSBC and Hang Seng Bank together adding nearly 100,000 new customers a month.

HSBC said it is on track to meet its core profitability targets through to 2028, in a further sign of how the region's lenders have sustained robust profits in recent years.

The strong performance has increased calls from activist groups in HSBC's home market of Britain for tax hikes on banks in finance minister John Healey's first budget, due on Wednesday.

Bank bosses have lobbied hard to avoid such an increase in sector levies, arguing it would curb lending and make Britain less competitive.

HSBC declined to forecast on the budget, but said it will stay in the UK whatever changes come to tax policy, emphasizing that there is no pressure to redomicile to Hong Kong.

The bank clarified regulatory capital reforms known as Basel 3.1 would benefit its core capital ratio by up to half a percentage point, where previously the bank had described a 'modest benefit' from the reforms.

HSBC announced an interim dividend of US$0.1 per share, the same as the previous quarter.

Reuters and staff reporter

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