Big fall in HSBC Q3 profits drags down markets

Asian business hold up well but Europe and America contribute to 18 per cent drop

HSBC reported an 18 per cent fall in its third-quarter pre-tax profits from a year ago, despite strength in its Asia operations, dragging down stock markets in Europe and Asia.

The bank’s profits before tax plunged to $4.8 billion in the three months that ended in September compared with the $5.3 billion average of Reuters’ analyst forecasts. On an adjusted basis, HSBC said its pre-tax profit fell 12 per cent to $5.3 billion.

Poor performance in the US and Europe lay behind the figures. However, in Asia profits before tax were up 4 per cent to $4.7 billion, with a resilient performance in Hong Kong.

HSBC’s reported revenue for the quarter was $13.4 billion, down 3 per cent due to lower client activity in global markets, compared with a strong third quarter a year ago.

Reported operating expenses were up 2 per cent due to significant items and adjusted operating expenses increased by 0.8 percent, reflecting cost discipline while continuing to invest, the bank said.

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HSBC said the revenue environment is “more challenging” than in the first half of 2019, and the outlook for revenue growth is “softer than we anticipated” at the half-year. As a result, the bank no longer expects to reach its return on tangible equity target of more than 11 per cent in 2020.

Noel Quinn, group chief executive, said the Asia business, held up well in a challenging environment in the third quarter, but in some parts, performance was “not acceptable”, including within continental Europe.

“Our previous plans are no longer sufficient to improve performance for these businesses, given the softer outlook for revenue growth. We are therefore accelerating plans to remodel them, and move capital into higher growth and return opportunities,” Quinn said.

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