HSBC Q3 profit of S$7.76b exceeds estimates

An aircraft flies past the HSBC headquarters building in the Canary Wharf financial district in east London.
An aircraft flies past the HSBC headquarters building in the Canary Wharf financial district in east London.PHOTO: REUTERS

LONDON (BLOOMBERG) - HSBC Holdings Plc reported third-quarter profit that beat analysts' estimates as chief executive officer Stuart Gulliver pared costs and bolstered the lender's capital cushion.

Adjusted pretax profit, which excludes one-time items, rose 7 per cent from a year earlier to US$5.59 billion (S$7.76 billion), Europe's largest bank said in a statement on Monday (Nov 7). That compared with the US$5.29 billion average estimate of five analysts compiled by Bloomberg News.

Mr Gulliver, who's almost six years into his tenure, is striving to maintain revenue while paring global operations to trim US$5 billion of annual expenses. His efforts to redeploy more assets into Asia have been complicated by China's slowing economy, while the bank is also navigating tougher capital rules, low interest rates and misconduct scandals.

"Our third-quarter performance reflected the strength of our network and the deepening impact of our strategic actions," Mr Gulliver said in the statement. "Our global universal banking model generated higher adjusted revenue than for the same period last year, and our cost reduction programmes continued to reduce our operating expenses."

The stock had climbed 11 per cent in London this year, the second-most among major European lenders behind Standard Chartered at Friday's close. Both get the vast majority of their profit in Asia and report in dollars, limiting the impact of Britain's vote to leave the European Union. Even so, HSBC still trades below its book value.

Adjusted revenue gained 2.4 per cent to US$12.8 billion. Adjusted operating costs fell 3.5 per cent to US$7.25 billion, compared with the US$7.33 billion average estimate of the five analysts surveyed.

The bank's common equity Tier 1 ratio rose to 13.9 per cent from 12.1 per cent three months earlier. That beat estimates of Morgan Stanley analysts, who estimated an improvement 12.9 per cent due to benefits from its Brazil unit disposal and retained earnings.