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HSBC reported a rise in pre-tax profits for the third quarter of the year as growth in wealth management boosted its first results since Georges Elhedery took over as chief executive.
Pre-tax profits at the UK-based bank rose to $8.5bn, from $7.7bn a year earlier. The figure beat analysts’ expectations of $7.6bn.
The bank announced a share buyback of up to $3bn and a 10 cents a share interim dividend, the latest in a series of handouts to shareholders in recent years.
The results show that “our strategy is working”, said Elhedery, who took over last month and has embarked on a sweeping overhaul of Europe’s biggest bank by assets, announcing plans last week to reorganise it on east-west lines.
He said those plans “aim to increase our leadership and market share in areas where we have competitive advantage” and enable clearer accountability and faster decision-making.
HSBC, one of the world’s largest deposit-taking institutions, has been a beneficiary of higher interest rates in recent years, but it has been under pressure to cut costs and show it can still grow as the benefit of rising rates has tailed off.
Net interest income — which accounted for more than half of HSBC’s revenue last year — fell to $7.6bn in the third quarter, missing analysts’ estimates of $8.2bn. The figure had fallen 11 per cent in the second quarter of this year, compared with a year earlier.
The bank’s net interest margin, a key measure of lending profitability, fell to 1.46 per cent from 1.7 per cent the same time last year. Costs rose to $8.1bn from $8bn a year earlier. The bank has previously said it expects costs to rise about 5 per cent in 2024.
Cost-cutting has been one of Elhedery’s priorities so far. His planned overhaul of the bank’s operations will remove an expensive layer of management, though the bank has not said how many jobs will be lost and how much it expects to save.
Under the plans — which Elhedery has said will simplify the bank’s operations — the lender will go from having three divisions to four, separating its Hong Kong business and its UK ringfenced bank into standalone units.
The other two divisions will be “corporate and institutional banking” and “international wealth and premier banking”. Within those, operations will fall either into an “eastern markets” section that covers Asia-Pacific and the Middle East or a “western markets” one covering the UK, Europe and the Americas.
One of HSBC’s biggest shareholders, the Chinese insurer Ping An, had been agitating for the bank to split off its Asia operations, though it suspended that campaign more than a year ago after shareholders rejected the idea.
The reorganisation comes as HSBC navigates a complex geopolitical backdrop as tensions continue between Beijing and Washington.
The bank is based in the UK, but Hong Kong is by far the biggest single source of its revenues, and it depends on the US for its dollar clearing licence. It has sold or made plans to sell several parts of its business in the west, including operations in Canada, Greece, US retail banking and Argentina.
The bank’s revenues, before accounting for changes in credit impairment charges, were $17bn, up from $16.2bn a year ago.
It made $1bn in provisions for bad loans, more than the $859mn analysts had expected, as it braced for losses linked to commercial real estate lending in Hong Kong and mainland China.
