HSBC Q3 profit slumps 42% on France sale charge, credit losses
2022.10.25 01:06
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HSBC Q3 profit slumps 42% on France sale charge, credit losses
Budrigannews.com – HSBC reported on Tuesday a 42% tumble in third-quarter pretax profits on the back of losses on the sale of its French unit and rising bad loans, but its interest income surged as banks benefit from rising rates around the world.
The London-headquartered bank posted a pretax profit of $3.15 billion for the three months ended Sept. 30. That was down from $5.4 billion a year ago, but well above the $2.45 billion average of analyst estimates compiled by the bank.
The results included a $2.4 billion hit from the sale of the bank’s business in France, part of a wider strategy by HSBC to excise parts of its once globe-spanning empire to boost profits.
HSBC, which makes the bulk of its sales and profit in Asia, has come under pressure from Ping An Insurance Group, the Chinese firm that is its biggest shareholder, to explore options including spinning off and listing its mainstay Asia business to increase shareholder returns.
The bank is also exploring a potential sale of its Canadian unit, as it tries to streamline operations in order to lift profits amid pressure from Ping An.
“We remain on track to achieve our cost targets for 2022 and 2023,” said Noel Quinn, HSBC’s Chief Executive Officer.
Quinn, who has been running HSBC for more than two years, said in the results statement that the bank aimed to “deliver its returns target of at least 12% from 2023 onwards and, as a result, higher distributions to our shareholders”.
HSBC, the first big British lender to report quarterly earnings, said the quarterly performance was affected by credit provisions of $1.1 billion, compared with the release of $659 million of cash reserves set aside for expected credit losses in the same quarter a year ago.
Rising rates traditionally buoy bank profits as they can make more from lending than the sums they pay to savers, but the current picture is clouded by the threat of an economic downturn that could cause hefty losses for lenders.
HSBC on Tuesday reported a snag in its plan to woo long-suffering shareholders with increased payouts, saying it needs to boost its core capital level of 13.4% back above 14% before it can resume buybacks and dividends.
It said it would do this by the first half of next year by increasing revenue and managing costs.
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