adminLONDON. — HSBC Holdings Plc, Europe’s largest bank, said third-quarter pretax profit rose 30 percent as the lender cut costs and focused on its most lucrative markets.
Pretax profit climbed to US$4,53 billion from US$3,48 billion in the year-earlier period, the London-based lender said in a statement yesterday. That missed the US$5,54 billion median estimate of 10 analysts surveyed by Bloomberg.
HSBC also said it’s being investigated by regulators, along with other firms, with regard to trading in the foreign-exchange market. Costs as a proportion of revenue, excluding gains and losses in the value of the bank’s own debt, fell to 61 percent from 64 percent, the bank said. That’s still higher than the goal of about 55 percent set by Chief Executive Officer Stuart Gulliver, who said in May that he will cut an additional US$3 billion of expenses after beating an earlier target.
“In a subdued revenue environment, management continues to take out costs,” Bernstein analysts including Chirantan Barua said in an e-mailed note after the results.
HSBC shares rose 17,2 pence, or 2,5 percent, to 704,50 pence as of 9:07am in London. They have gained 9,1 percent this year, trailing the 18 percent gain for the 44-member Bloomberg Europe Banks and Financial Services Index.
Gulliver has closed or sold 60 businesses and eliminated 46 000 jobs since the start of 2011. The bank has struggled to boost revenue that’s been crimped by the sovereign-debt crisis in Europe, the winding down of its US consumer-finance operation and slower growth in China this year.
“HSBC has made progress on costs and divestments, exiting local or small businesses,” Citigroup Inc. analysts led by Andrew Coombs, who rate the bank a buy, wrote in an October 23 note to investors.
The lender said pretax profit at its investment-banking business, led by Samir Assaf, fell to US$1,85 billion from US$2,25 billion, hurt by weaker corporate fixed-income revenue.
Weaker bond trading has hurt other banks including Barclays Plc, which said last week that that revenue from fixed income, currencies and commodities dropped 44 percent to 940 million pounds, the lowest since 2011. The five biggest US investment banks’ combined revenue from FICC trading slid 25 percent from a year ago, data compiled by Bloomberg Industries show.
Standard Chartered Plc, the other UK bank that gets most of its profit in Asia, last week said third-quarter revenue dropped as growth slowed in its corporate banking business.
Currency Probe
Regulators in London and Zurich are probing the US$5,3 trillion-a-day foreign-exchange market after Bloomberg News reported in June that dealers in the industry said they had been front-running client orders and attempting to rig benchmark rates.
“We are cooperating with the investigations, which are at an early stage,” HSBC said today.
Foreign exchange accounts for the most revenue in the bank’s global markets business, generating US$660 million for the third quarter.
HSBC completed the sale of its U.S. credit-card unit to Capital One Financial Corp for a premium of US$2,5 billion in May 2012, and sold US$3,2 billion of US consumer loans in March.
HSBC is cutting back in the US after its 2003 purchase of a sub-prime lender, Household International Inc., required it to set aside more than US$65 billion for souring loans. HSBC said last month it plans to appeal a US$2,46 billion US court verdict against its former Household unit. A federal judge in Chicago ordered the bank to pay $1.48 billion in damages and US$986 million in interest, according to court filings. — Bloomberg.
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