HSBC shows progress taming costs with third-quarter profit beat

Pre-tax profit at HSBC's global banking and markets unit increased 21 per cent to US$1.8 billion, compared with the US$1.6 billion average estimate of analysts surveyed by Bloomberg.
Pre-tax profit at HSBC's global banking and markets unit increased 21 per cent to US$1.8 billion, compared with the US$1.6 billion average estimate of analysts surveyed by Bloomberg.PHOTO: ST FILE

HONG KONG (BLOOMBERG) - HSBC Holdings chief executive officer John Flint, in charge of Europe's biggest bank since February, has finally delivered the kind of growth that investors were waiting for.

Analysts waiting for the London-based bank's third-quarter earnings were mainly focused on whether HSBC would deliver revenue gains that outpaced cost increases - what is known as "positive jaws". The bank's nine-month figure narrowed to negative 1.6 per cent, it said on Monday (Oct 29), compared with negative 5.6 per cent in the first half of the year, indicating HSBC managed to increase revenue faster than costs in the third quarter.

"(Jaws) need to be positive in order for management to remain on track with 2018 guidance," Deutsche Bank AG analyst David Lock wrote in a note to investors earlier this month.

The bank said in an investor presentation, also released on Monday, that it was on track to deliver positive jaws for the year, based on current operating trends.

The result bolsters Mr Flint's case that he can deliver profit growth for HSBC while spending billions of dollars on an expansion into key Asian markets and technology upgrades. The lender's shares have slumped this year, and last week fell to their lowest level in nearly two years.

Adjusted pre-tax profit, which excludes one-time items, climbed 16 per cent to US$6.19 billion (S$8.5 billion) in the third quarter, compared with the US$5.73 billion average estimate of 11 analysts compiled by the bank. Adjusted revenue increased 9 per cent to US$13.84 billion, compared with the US$13.68 billion average estimate surveyed by HSBC.

Mr Flint, who replaced Mr Stuart Gulliver as CEO, is pushing his strategy along with chairman Mark Tucker, who joined in late 2017. The new team wants to build out its presence in Hong Kong and China's Pearl River Delta region. The lender is planning a hiring spree for its Asian wealth-management business.

Pre-tax profit at HSBC's global banking and markets unit increased 21 per cent to US$1.8 billion, compared with the US$1.6 billion average estimate of analysts surveyed by Bloomberg. According to people familiar with the matter, former top JPMorgan Chase & Co banker Greg Guyett is joining the firm to jointly run the division.