HONG KONG • HSBC yesterday reported a sharper-than-expected 86 per cent fall in pre-tax profit for the third quarter as the British lender booked a US$1.7 billion (S$2.4 billion) loss on the sale of its Brazilian unit, and it was also hit by adverse foreign currency movements.

The bank's reported pre-tax profit was US$843 million in the September quarter, down from US$6.1 billion in the same period a year ago, HSBC said in a Hong Kong stock exchange filing.

That was much lower than estimates of US$2.45 billion, based on the average of analysts' forecasts compiled by the bank. HSBC is the last major British-based lender to report third-quarter earnings, after Lloyds, Barclays and RBS all showed signs of coping better than expected in the aftermath of Britain's vote to leave the European Union.

Adjusted pre-tax profit, excluding the one-time charges, rose 7 per cent during the quarter to US$5.6 billion, helped by increased revenue from its global banking and markets business, which houses its investment bank, HSBC said.

The bank said the main differences between reported and adjusted profits are foreign currency translation costs and significant items, including the operating results for its Brazil business as well as the loss recognised on disposal.

HSBC earlier this year sold its Brazil unit in a US$5.2 billion deal.

The lender's core capital ratio, a key measure of financial strength, rose to 13.9 per cent at the end of the September quarter from 12.1 per cent at end-June, bolstered by a change in the "regulatory treatment" of its investment in China's Bank of Communications, said chief executive Stuart Gulliver in a statement.

"This is another action forming part of our ongoing capital management of the group that reinforces our ability to support the dividend, to invest in the business and, over the medium term, to contemplate share buybacks, as appropriate," he said.

Almost six years into his tenure, Mr Gulliver 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.

HSBC's shares rose 2.2 per cent as of 1pm in Hong Kong, the biggest intraday gain in more than a month.

The stock had climbed 11 per cent in London this year, the second- most among major European lenders.

REUTERS, BLOOMBERG