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LONDON (Alliance News) - HSBC Holdings PLC on Monday reported an "encouraging" third quarter with consensus beating profit, as revenue rose and the bank kept "a strong grip" on costs.
The Asia-focused banking giant said all of its global businesses expanded in the recent period.
Shares were up 4.2% Monday morning at 630.10 pence each, the top gainer in the FTSE 100 index.
For the three months ended September, pretax profit rose 28% to USD5.92 billion from USD4.62 billion the year prior. Excluding the impact of currency translation, pretax profit rose 16% on the year before.
Shore Capital called HSBC's third-quarter results strong, saying adjusted pretax profit of USD6.19 billion, up 16% on year, was 8% better than consensus at USD5.73 billion and 6% better than Shore's own forecast of USD5.86 billion. The broker said HSBC's beat to consensus resulted from better-than-expected revenue and costs.
Revenue added 1.6% to USD13.80 billion from USD13.58 billion the year before. Revenue performance was driven by "strong" growth in all of HSBC's three main global businesses.
Within divisions, Retail Banking & Wealth Management's adjusted pretax profit increased 25% to USD2.10 billion from USD1.68 billion.
Commercial Banking's adjusted pretax profit increased 17% to USD1.89 billion from USD1.62 billion.
Global Banking & Markets saw adjusted pretax profit increase 21% to USD1.81 billion from USD1.50 billion.
"Retail Banking & Wealth Management and Commercial Banking built on the momentum generated in the first half of the year, with both using the benefits of past investment to grow lending and deposit balances," said John Flint, chief executive officer.
Flint continued: "Adjusted revenue growth in Retail Banking & Wealth Management came primarily from current accounts, savings and deposits, particularly in Hong Kong. In Commercial Banking, all of our transaction banking businesses generated higher adjusted revenue, including a sixth consecutive quarter of double-digit year-on-year adjusted revenue growth in Global Liquidity and Cash Management.
"Global Banking & Markets had a very good quarter on the back of our strength in transaction banking and foreign exchange. Our differentiated Global Banking & Markets business model continues to deliver for our clients, leverage our strengths and generate stable, balanced revenue returns for the group."
Group operating expenses decreased 6.8% to USD7.97 billion from USD8.55 billion the year before.
This is largely due the bank's significant items decreasing to USD228 million from USD762 million. The large drop in one-off costs included the non-recurrence of "costs to achieve", which had been USD700 million in the year-ago comparative period. "Costs to achieve" are the one-time expenses of HSBC's cost-reduction and productivity programme.
The drop in significant items also included a decrease in settlements & provisions in connection with legal & regulatory matters to USD1 million from USD104 million in the same period last year.
HSBC's net loans & advances to customers increased 3.8% in the quarter to USD984.5 million from USD945.2 million.
The bank's customer accounts at September 30 increased slightly to USD1.35 trillion from USD1.34 trillion in the same period last year but down from USD1.36 trillion at June 30.
HSBC proposed a 10 US cent per share third quarter dividend. This was flat on the year prior.
The common equity tier one ratio for HSBC ended the period at 14.3%, an increase from 14.2% at June 30, but down from 14.5% nine months earlier.
HSBC's net interest margin at September 30 was 1.67%, increased from 1.63% at the end of the third quarter in 2017 and up from 1.63% nine months earlier.
In June, newly-appointed Flint described a strategy in which the banking group would return to "growth mode" following its period of restructuring.
By 2020, HSBC is targeting a return on tangible equity of more than 11% under this new strategy. It also plans to invest between USD15 billion and USD17 billion dependant on "achieving positive adjusted jaws each financial year".
For the third quarter, return on tangible equity stood at 10.9%, up from 8.2% the year prior.
The jaws ratio - a key financial performance indicator - is the difference between the percentage growth in income and the percentage growth in expenses. For the nine months ended September, the jaws ratio was at negative 1.6%.
HSBC plans to "sustain" dividends at current levels and engage in share buybacks where "appropriate" as well as intending to retain CET1 solvency ratio above 14%.
In order to achieve this, HSBC is targeting mid-single digit revenue growth combined with a low to mid-single digit growth in operating expenses.
Flint added on Monday: "These are encouraging results that demonstrate the revenue potential of HSBC. We are doing what we said we would - delivering growth from areas of strength, and investing in the business while keeping a strong grip on costs. We remain committed to growing profits, generating value for shareholders and improving the service we offer our customers around the world."
