Last checked at 
(Sharecast News) - HSBC on Monday reported bumper third-quarter profits that smashed expectations as it unveiled plans for a share buyback of up to $2bn after releasing hundreds of millions set aside for expected bad loans during the Covid pandemic.
The bank's reported pre-tax profit for the third quarter jumped 75.8% year on year to $5.4 billion, well beyond the $3.77bn forecast by analysts in estimates compiled by the bank. Revenue rose 0.7% to $12bn, compared with an expected 3.1% rise.
HSBC released around $700m in Covid-19 bad debt provision, compared with expectations of further $236m charge in the third quarter.
"While we retain a cautious outlook on the external risk environment, we believe that the lows of recent quarters are behind us," said chief executive Noel Quinn.
Net interest margin, the difference between lending and savings rates, was 1.19%, compared with 1.2% in the second quarter.
HSBC's common equity tier 1 ratio, a measure of its balance sheet strength, came in at 15.9% against 15.6% in the previous three months.
Rival UK bank Barclays last week revealed that it had nearly doubled its third-quarter profit to £2bn, having been supported by strong mortgage lending and a surge in investment banking activity. NatWest and Lloyds are due to report on their third-quarter results later in the week.
AJ Bell investment director Russ Mould said "beneath the surface there are some more troubling signs in these numbers".
"The net interest margin, a key measure of banks' profitability, is down suggesting HSBC is falling down somewhat on the basics of banking. Despite stripping out costs, HSBC now faces a considerable challenge from wage inflation given a wider environment of rising prices," he said.
"HSBC also has exposure to a Chinese property market which is still awaiting with bated breath any fall-out as huge property developer Evergrande teeters on the brink."
Hargreaves Lansdown analyst Sophie Lund-Yates said noted that HSBC key Asian businesses were lagging their counterparts, "meaning recovery is currently being funded by the areas of the business HSBC is trying to shrink".
"While we remain conscious the strategic pivot is taking longer than we'd like, an Asian focus could prove an advantage over more domestically exposed rivals. However, HSBC's size and sprawling global footprint means its performance will always track wider global economic growth pretty closely. It's unlikely to crash in a time of recovery, but unlikely to shoot the lights out either."
16 Apr 2024 17:09
Europe's STOXX 600 slides in broader market decline on geopolitical jitters
ECB policymakers stick with June rate cut plan
*Read more