HSBC Profit Jumps 32% but Shares Fall 6% on Forecast Miss
HSBC reported third-quarter profit of $9.6bn and returned $2.7bn to shareholders, yet the result came in slightly below forecasts and the bank's shares dropped.
HSBC said profits grew nearly a third to $9.6bn in the July to September quarter, helped by higher interest rates, lower loan losses and smaller legal provisions than a year earlier. The 32% rise was slightly below analyst forecasts, and the shares fell by more than 6% in early trading.
The bank will hand $2.7bn to shareholders. That includes another $1bn share buyback and an interim dividend of $0.1 per share, which HSBC said means a further $1.71bn paid out to investors.
Where the gain came from
Net interest income, the gap between what a bank charges borrowers and pays savers, rose 6%, or $500m, to $9.3bn. HSBC credited deposit growth and the reinvestment of its structural hedge at higher yields. Deposits in Hong Kong grew, while UK deposits stayed flat.
Costs mattered more. Operating expenses fell 12%, or $1.3bn, to $8.8bn. Legal provisions were also $1.4bn lower, because last year's figure included money set aside for a claim linked to the Bernard Madoff fraud.
Market reaction
HSBC was the biggest company on the FTSE 100, worth almost £234bn at Monday's close, just ahead of Shell. Its fall pulled the index down 108 points, or 1%, to 10,659 and weighed on other banks. Chris Beauchamp, chief market analyst at IG, said HSBC results rarely bring fireworks, and that the market had not been inspired by these numbers.
Group chief executive Georges Elhedery said clients continue to turn to the bank to navigate uncertainty and seize new opportunities.
Budget talk
The results came a day before Chancellor John Healey's Budget. The TUC urged him to raise taxes on banks and said the surcharge could go beyond the 8% level that preceded Jeremy Hunt's cut to 3%. Raising it to 16%, the union said, would bring in £24bn over four years. The New Economics Foundation also called the profits hard to swallow for households facing higher mortgage costs.
HSBC finance chief Pam Kaur said the bank was very encouraged by the government's growth agenda. Asked about reports of planned job cuts in its UK wealth management business, the bank declined to comment on press speculation.
Source: The Guardian