2nd November 2015
Profits before tax at HSBC jumped 32% year-on-year in the third quarter to hit a better-than-expected $6.1bn (£3.9bn) for the period.
Profit was up from $4.6bn on the same period last year and was helped by a fall in regulatory fines – down $1.4bn on the same period last year.
Revenues at Europe’s biggest bank during the three months however tumbled 4% to $14bn, mainly from its retail banking and wealth management arm as a result of the stock market correction in Asia earlier this year.
The bank, which generates two-thirds of its earnings from Asia, announced a three year plan in June and this update provided investors a first chance to analyse the progress, noted Graham Spooner, investment research analyst at The Share Centre.
He said: “The company said that so far, adjusted operating expenses had fallen by 4% from the second quarter and it is nearly 30% of the way towards completing the reduction in its assets.”
As part of its cost-cutting drive, in June it announced it was set to axe 8,000 jobs in the UK.
In a statement accompanying Monday’s market update HSBC chief executive Stuart Gulliver said “performance was resilient against a tough market backdrop”.
He added: “We have continued to implement the strategic actions we announced at our Investor Update in June.
“Our cost-reduction measures are beginning to have an impact on our cost base. There is more to achieve on costs and we expect the measures we have already taken to have a further impact in the fourth quarter. We also started a number of additional initiatives in the third quarter that will deliver savings before the end of the year.
“Achieving our strategic targets remains our primary focus. We will provide a further update on our progress at our full-year results in February.”
Despite the upbeat results, shares in the bank fell by more than 1% or 7.31p in early trading to 500.29p but the analyst consensus towards the stock is point towards a ‘buy’.
Spooner added: “These figures were better than expected by the market. Interested investors should also be aware that the group stated today that it may put off its decision on its controversial domicile until next year.
“Income seekers in the banking sector have been hit hard in recent years. However, HSBC has remained a significant payer and though progress may continue to be slow in the face of many challenges, the shares could be a better option than other banks.
“As a result, we recommend HSBC as a ‘buy’ for low to medium risk investors. The group is viewed as being more conservatively managed with a superior balance sheet and deposits.”