HSBC’s global private banking business logged a gain in pre-tax profit, at $252 million in the three months to the end of September, amid cost-reduction measures.

HSBC’s global private banking business logged a gain in pre-tax profit, at $252 million in the three months to the end of September, amid cost-reduction measures, the UK-listed banking giant said today.

The latest figure is up from $248 million a year before and also up from $241 million in the previous quarter, HSBC said.

The bank also said it had put aside $800 million towards the expected costs of US regulatory investigations of matters such as money laundering.

The latest private banking profit figure was “driven by a reduction in operating expenses, arising from a decline in staff numbers, decreased performance-related pay due to lower revenue generated, and strict cost control. This was partly offset by lower revenue, reflecting a fall in brokerage fees as a result of lower client transaction volumes due to reductions in volatility,” HSBC said.

“Fees, including account service fees, also declined due to a fall in average client assets as a result of cumulative negative net new money over the last four quarters and a reduction in client numbers,” the bank said.

Overall, Europe’s biggest bank logged a pre-tax profit of $3.481 billion, down from $7.155 billion a year ago. Over the nine months to September 30, it logged a total pre-tax profit of $16.218 billion, a decline from $18.629 billion a year ago.

The private bank had a cost-efficiency ratio of 70.9 per cent at the end of the quarter, slightly lower than a year ago, when the ratio was 70.1 per cent, the bank said in a statement.

Negative

The bank added: “The negative net new money and the fall in client numbers were in part driven by a program which GPB [global private banking] is undertaking in line with our strategy to focus the target client base on high net worth international and domestic relationships.” The statement did not give an actual figure for such client numbers or money flows, however.

Within retail banking and wealth management, HSBC logged net operating income before loan impairments and credit risk provisions of $10.499 billion in the third quarter, up from $7.864 billion a year ago.   

Across the whole banking group, HSBC said it reported pre-tax profits fell to $3.5 billion in the third quarter, down by $3.7 billion on the same quarter a year ago, with $5.8 billion relating to adverse movements on the fair value of its own debt. On an underlying basis, pre-tax profit was $5.0 billion, up by 125 per cent on 3Q11.

The bank had a core Tier 1 capital ratio of 11.7 per cent at the end of the quarter.

During the third quarter, HSBC had to make a provision of $800 million stemming from ongoing US anti-money laundering, Bank Secrecy Act and Office of Foreign Assets Control investigations.

“We are actively engaged in discussions with US authorities to try to reach a resolution, but there is not yet an agreement. The US authorities have substantial discretion in deciding exactly how to resolve this matter. Indeed, the final amount of the financial penalties could be higher, possibly significantly higher, than the amount accrued. We have also made UK customer redress provisions of $353 million, mainly in respect of Payment Protection Insurance,” HSBC said.