For the three months ended September, pretax profit at Europe’s biggest bank by asset-size fell 18% to $4.84bn from $5.92bn a year earlier, according to its third quarter earnings release.
The figure was lower than the $5.3bn average of analysts’ estimates compiled by HSBC, and the bank now no longer expects return on equity of at least 11% to be achieved in 2020, citing “challenging” conditions.
“Parts of our business, especially Asia, held up well in a challenging environment in the third quarter,” said Noel Quinn, group chief executive in a statement accompany the release of the figures on Monday.
Profit before tax (PBT) in Asia was up 4% to $4.65bn compared with $4.46bn in the third quarter 2018, and its PBT of $14.43bn in the the region for the first nine months of the year makes up 84% of HSBC’s worldwide PBT of $17.24bn.
Revenue for the first nine months of the year in Hong Kong rose 7%, despite five months of protests and the prospect of the first recession for a decade in the territory.
However, HSBC said its expected credit losses in Hong Kong, which is its biggest profit centre, increased by $400m in the third quarter and includes a “charge to reflect the economic outlook of Hong Kong”.
HSBC, like rivals Deutsche Bank and UBS, intends to grow its wealth management operation in the region in hopes of driving growth.
The bank said operating costs were up, particularly in Asia, “to support business growth and the impact of investment in strategic initiatives (up $0.1bn) to grow the wealth management business in Asia, enhance digital capabilities, and drive growth in key markets through lending”, according to the bank’s financial statement.
“Unacceptable performances”
Performance by the global banking and markets’ division “continued to reflect low levels of client activity”, said the statement, but its adjusted revenue in Asia increased by 9% compared with the third quarter 2018 and represented over 50% of the division’s total adjusted revenue.
Commercial and retail banking delivered higher revenue growth than in the same period last year and global private banking attracted new money of $19bn in during the first nine months of 2019.
However, Quinn said that “performance was not acceptable” in some other parts, “principally business activities within continental Europe, the non-ring-fenced bank in the UK, and the US”.
The group made a loss of $944m in Europe, compared with a profit of $634m in the third quarter 2018, and PBT in North America fell to $299m from $467m in the same three-months period last year.
“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,” said Quinn.
Source: HSBC
