HSBC CEO paints bullish outlook after 74% jump in profit, plans $2.7b buyback

HSBC posted pre-tax profit of US$5.4 billion for the quarter to September.
HSBC posted pre-tax profit of US$5.4 billion for the quarter to September.PHOTO: REUTERS

LONDON (BLOOMBERG) - HSBC Holdings  painted a bullish outlook in the months ahead fueled by likely increases in interest rates and revealed it would soon kickoff a US$2 billion (S$2.7 billion) share buyback. 

The bank posted pre-tax profit of US$5.4 billion (S$7.28 billion) for the quarter to September, up 74 per cent from US$3.1 billion a year earlier and above the US$3.78 billion average estimate of 14 analysts compiled by HSBC.

HSBC reversed US$700 million in expected credit losses and anticipates more will be taken back through the end of the year, offsetting a decline in revenue wealth management and markets. 

“While we retain a cautious outlook on the external risk environment, we believe that the lows of recent quarters are behind us,” chief executive officer Noel Quinn said in the statement. 

Globally, banks have been benefiting from an economic recovery as pandemic restrictions have eased and stimulus has fueled a surge in dealmaking and trading, but HSBC said revenue at its debt markets business was partly lower due to a shift of capital out of that businesses. The lender also saw lower revenue in wealth and personal banking, while commercial banking income gained.

The bank’s shares gained about 1 per cent to HK$47 as Hong Kong trading resumed for the afternoon session. 

HSBC, an institution that’s heavily connected to world trade, is in the midst of a big shakeup to expand in Asia and is targeting wealth management as a key profit driver. The lender is exiting businesses in the United States and Europe, pouring billions of dollars in fresh investments into Asia, where the bank already makes most of its money. Adjusted profit in Asia accounted for more than half of the total in the third quarter.

The lender downplayed risks spreading in China’s real estate sector as turmoil swirls around China Evergrande Group. It had US$19.6 billion exposure in China’s real estate sector, including Hong Kong incorporated property firms, at the end of June, the lender said. As of the end of September, HSBC has no direct credit exposure to developers in the “red” category under China’s three red lines.

In an interview with Bloomberg Television, chief financial officer Ewen Stevenson said the bank expects no material fallout from Evergrande.