Here's how four City analysts reacted to HSBC's third quarter results

Emma Haslett
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HSBC is shifting its focus towards Asia (Source: Getty)

HSBC has brought third-quarter reporting season for the so-called big four lenders to a close with a staggering 448 per cent rise in profits.

Shares in the lender were down one per cent in mid-morning trading, despite the bank saying it had been boosted by cost-cutting and a shift towards Asia. Here's what analysts said:

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1. Changes are paying off

"HSBC’s renewed focus on Asian markets is paying off. The bank delivered a very strong set of earnings with reported profit before tax for the third quarter of $4.6bn, up $3.8bn compared with the same period a year before.

"Return on equity has risen to 8.2 per cent from 4.4 per cent a year ago. The 10 per cent target won’t be reached this year but it’s getting there. At 7.1 per cent for the third quarter it was below the 9.5 per cent seen in the second quarter.

"As with all banks revenue growth is only as important as cutting out some of the fat. More good work from HSBC on this front with the bank on track to achieve circa $6bn of annualised cost savings by the end of the year. HSBC should be among the biggest beneficiaries from higher global interest rates, while the focus on faster-growing markets in Asia will continue to support."

- Neil Wilson, ETX Capital

2. Reaping the rewards

“Shifting to the East has reaped rewards for the bank, whose investors have been significantly rewarded over the past few months, even if today’s performance is relatively muted.

"All but one of the UK banks has seen their share price rise significantly over the past year, with Barclays the exception, as investors remain concerned about their past misdemeanours and investment banking profits.”

- Rebecca O'Keeffe, Interactive Investor

3. Increasingly reliant on the health of the global economy

"HSBC is undertaking a major repositioning, following which it will become much more focused on Asia and far less exposed to volatile investment banking activities.

"At the same time, a focus on trade financing means the group’s future is increasingly reliant on the health of the broader global economy... [its] third quarter results... highlight the good momentum from the first half continuing into the third quarter.

"The pivot to Asia appears to be bearing fruit, driving higher returns and lending growth, particularly in Hong Kong and the Pearl River Delta. The region accounted for 70 per cent of group adjusted profit in the first nine months of the year, while lending growth in the region grew by 17 per cent in the third quarter."

- Analysts at Patronus Partners

4. Look under the bonnet

"The headline growth seen by HSBC over the last year is heavily skewed by the sale of its Brazilian operations in 2016, so the adjusted numbers give us a much better idea of what’s going on underneath the bonnet.

"After taking out the effect of the Brazilian sale, the underlying numbers are not quite as flattering to the progress made by HSBC. Profit in the third quarter actually fell backwards slightly, as operating costs rose faster than revenues.

"The retail and commercial banking arm performed pretty well but have been let down by a weak showing in the investment banking division. However this is against a backdrop of a market-wide downturn in fixed income trading, and actually HSBC has held up better than many of its competitors.

"Regionally it’s Asia which is doing the heavy lifting for HSBC... the fortunes of HSBC are therefore largely tied up in the Asian growth story, for better or worse. As the CEO baton is about to be passed from Stuart Gulliver to John Flint, HSBC will hope to make good on its eastern promise."

- Laith Khalaf, Hargreaves Lansdown

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