Last checked at 
* Q3 profit rises to $5.4 bln on better loan outlook
* Costs set to tick up to $32 bln as inflation bites
* $2 billion share buyback to begin shortly
* London shares rise 1%, touch 4-month high
(Adds share price, analyst reaction)
By Anshuman Daga and Lawrence White
SINGAPORE/LONDON, Oct 25 (Reuters) - HSBC shrugged
off concerns about pandemic-related bad loans and property
problems in China on Monday with a surprise 74% quarterly profit
jump and a $2 billion share buyback.
The British bank's profit growth was mainly driven by the
release of cash reserves set aside in anticipation of
pandemic-induced defaults, with HSBC's finance chief Ewen
Stevenson telling Reuters that the worst of that impact is
likely past.
"You should also look at the buyback as a measure of the
confidence that we have at the moment that we are not unduly
concerned about our exposures in China," Stevenson said.
The Asia-focused bank said it had $19.6 billion in lending
to China's property sector, where China Evergrande Group
is grappling with a $300 billion debt pile, stoking
fears of further defaults and contagion risks.
HSBC CEO Noel Quinn, who was confirmed in the role in 2020
just as the pandemic-induced economic crisis began, is betting
on Asia to drive growth, by moving global executives there and
ploughing billions into lucrative wealth management.
The bank could spend up to $1.5 billion more on acquisitions
in that business after buying insurer AXA's Singapore assets for
$575 million in August, Stevenson said.
"While we retain a cautious outlook on the external risk
environment, we believe that the lows of recent quarters are
behind us," Quinn said in a statement.
HSBC posted pretax profit of $5.4 billion for the quarter to
September, versus $3.1 billion a year earlier and the $3.78
billion average estimate of 14 analysts compiled by HSBC.
Analysts at stockbrokers Goodbody said HSBC's revenue
guidance and the reversal of expected credit losses "should
drive earnings upgrades while the capital beat and the $2bn
buyback will be pleasing to investors."
HSBC's London-listed shares rose 1% to their highest in four
months.
INFLATION FEARS
Despite the overall positive results, HSBC said its cost
projections for 2022 had risen to $32 billion from $31 billion,
due to global inflation pressures which would push up its $19
billion wage bill.
Major companies worldwide have in recent weeks warned of the
impact of rising costs driven by spiralling energy prices and
supply chain disruption.
"A little bit of inflation is good for us as it should drive
policy rates higher," Stevenson said.
"However, we have a cost base of $32 billion of which $19
billion is compensation... so it doesn't take much (to push up
costs), 2 or 3% inflation on the cost base is $400 to $600
million of additional costs," he added.
Set against those concerns, HSBC released $700 million in
cash it had put aside in case pandemic-related bad loans spiked,
as opposed to the same time a year earlier when it took an $800
million charge.
INVESTMENT BANK
Another headache for HSBC is investment banking, where
rivals such as Citigroup are riding an M&A boom https://www.reuters.com/world/us/us-banks-beat-profit-estimates-economic-rebound-red-hot-markets-2021-10-14
to record-beating profits.
HSBC's investment bank saw income fall this year as it paid
the price for its bias towards debt markets, which have been
patchy amid low interest rates that crimped trading, while
rivals' equities and merger-focused businesses have thrived.
It is the second big British bank to post strong quarterly
results, after Barclays doubled profits on a strong
performance by its investment bank advisory
business.
HSBC's results will set expectations high for Standard
Chartered, which focuses on similar markets and reports
on Nov. 2.
(Reporting by Anshuman Daga in Singapore and Lawrence White in
London; Editing by Ana Nicolaci da Costa and Alexander Smith)
