HSBC's share price rose by more than four per cent this morning, despite a sharper-than-expected slump in profits in the third quarter – although stripping out currency fluctuations, things looked rather better…
Pre-tax profit at the British lender fell 86 per cent to $843m in the quarter ended 30 September, down from $6.1bn in the same period of last year. Analysts had predicted a slump of around 60 per cent, to $2.4bn.
However, adjusted profit – which strips out currency fluctuations and one-off losses – nudged up seven per cent to $5.6bn, aided by increased revenue from its global banking and markets business, which houses its investment bank.
Over the first nine months of the year, pre-tax profit slid 46 per cent to $10.6bn, as a result of changes in the "fair value of [HSBC's] own debt", the bill from implementing cost reduction programmes as well as the sale of its Brazilian arm, which it sold this summer in a $5.2bn deal.
Reported revenue between June and September reached $9.5bn, below expectations of $11.3bn and a 37 per cent fall from the $15.1bn posted in the same period of last year.
HSBC shares were trading up 4.4 per cent at the time of writing to 621.1p in London.
Why it's interesting
The lender's core capital ratio, a key measure of financial strength, rose to 13.9 per cent in the third quarter, from 12.1 per cent at the end of June. This was bolstered by a change in the "regulatory treatment" of its investment in China's Bank of Communications, chief executive Stuart Gulliver said.
HSBC has been the last major UK-based lender to report its third-quarter results, after other major banks Lloyds, Barclays and RBS all showed signs of coping better than expected in the three months following the EU referendum.
Looking ahead to the full year, analysts are expecting the bank to unveil statutory pre-tax profits of $14.4bn, along with revenues of $53bn.
Investors will likely be looking for clues in today's results on who will be replacing chairman Douglas Flint and chief executive Stuart Gulliver. Flint confirmed earlier this year that he will leave the lender in 2017, with Gulliver planning to part ways fairly soon after.
What HSBC said
Our third-quarter performance reflected the strength of our network and the deepening impact of our strategic actions. Reported profits were down, but adjusted profits were higher than last year’s third quarter in all four global businesses and four out of five regions.
Global banking and markets had strong adjusted revenue growth in the quarter, with market share gains in debt capital markets globally, and rates and credit in Europe. We also achieved one of our best ever rankings for global cross-border mergers and acquisitions.
Principal retail banking and wealth management performed relatively well due to the impact of stock market movements on our insurance business in Asia, compared with a weak third quarter of 2015. Commercial banking revenue remained stable, as higher balances in global liquidity and cash management helped mitigate the impact of lower revenue from trade finance.