Across the HSBC group as a whole there was a large contrast between European and Asian results.
HSBC’s global private bank today said that its adjusted pre-tax profit rose to $319 million in the nine months to 30 September from $280 million a year ago, and its adjusted cost/efficiency ratio narrowed quite sharply to 75.4 per cent from 80.2 per cent.
The UK/Hong Kong-listed banking group said that private banking net operating income totalled $11.176 billion in the nine-month period, down from $11.986 billion a year earlier. Total operating costs were $1.052 billion, against $1.072 billion.
In the three months to 30 September, the private bank’s adjusted pre-tax profit was $123 million, versus $98 million in the third quarter of 2018.
Across the whole of the HSBC bank, the group logged a reported pre-tax profit of $17.2 billion in the nine-month period, a gain of 4 per cent on a year earlier. That figure included a $828 million dilution gain recognised in Saudi Arabia, provisions for redressing clients ($1.2 billion) and $407 million in severance costs. Reported revenues rose by 4 per cent, HSBC said.
However, there was a major geographic variation within these figures, with Europe posting a loss, while Asia was particularly robust. HSBC said that it logged an operating loss of $962 million in Europe for the nine-month period, falling from a profit of $744 a year earlier. In Asia, however, it logged a profit of $14.431 billion, up from $13.838 billion. The North America, Middle East and North Africa, and Latin America regions all made a profit.
In the quarter, HSBC said profit attributable to ordinary shareholders fell by 24 per cent to $3.0 billion, reflecting “challenging market conditions” and some restructuring costs and the expense of redressing clients.
The group warned that it no longer expected to hit its return on tangible equity target of more than 11 per cent for 2020, explaining that the revenue environment is “more challenging” than in the first six months of this year, and the outlook is likely to be softer than it had expected at the half-year point of 2019.
HSBC said it will “rebalance our capital away from low-return businesses and adjust the cost base in line with the actions we take” – a term that could be taken to mean a further squeeze on capital-intensive operations such as investment banking. The statement did not go into detail ahead of a conference call today. HSBC said that it intended to sustain its dividend and protect a Common Equity Tier 1 ratio of more than 14 per cent. (The ratio is a typical measure of a bank’s capital buffer.)
“Parts of our business, especially Asia, held up well in a challenging environment in the third quarter. However, in some parts, performance was not acceptable, principally business activities within continental Europe, the non-ring-fenced bank in the UK, and the US,” Noel Quinn, group chief executive, said.
“Our previous plans are no longer sufficient to improve performance for these businesses, given the softer outlook for revenue growth. We are therefore accelerating plans to remodel them, and move capital into higher growth and return opportunities,” Quinn said.