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(Alliance News) - HSBC Holdings PLC on Monday reported a sharp rise in profit in the third quarter, with Chief Executive Noel Quinn declaring the lender's Covid troubles are behind, emboldening the lender to embark on a USD2 billion share buyback.
HSBC shares were trading marginally higher at HKD46.55 on Monday afternoon in Hong Kong.
China-focused HSBC had a tumultuous 2020 as its fortunes took a hammering from both the coronavirus and simmering geopolitical tensions.
Quinn has overseen a dramatic restructuring, slashing the bank's workforce by about 35,000 and refocusing on its most profitable areas in Asia and the Middle East, a tactic he said was now paying dividends.
In the three months to September 30, the bank reported pretax profit of USD5.40 billion, up sharply from USD3.07 billion the year before.
HSBC benefited from a USD659 million expected credit benefit compared to a USD785 million charge a year before.
"We had a good third-quarter performance, with strong growth in profits supported by additional credit provision releases. Our strategy remains on track, with good delivery in all areas. This was reflected in more consistent top-line growth, robust lending pipelines across our businesses, and rising trade and mortgage balances," Quinn said.
Net interest income improved to USD6.61 billion from USD6.45 billion, while net fee income rose to USD3.32 billion from USD2.98 billion. Net insurance premium income slipped to USD2.72 billion from USD2.78 billion. As a result, total revenue increased by 0.7% to USD12.01 billion from USD11.93 billion.
Net interest margin worsened slightly to 1.19% from 1.20%.
The loan book ended the quarter at USD1.040 trillion, up from USD1.038 trillion at the same point last year but down from USD1.060 trillion at the end of the second quarter.
Customer deposits stood at USD1.688 trillion, up from USD1.643 trillion a year before and improved on USD1.669 trillion three months earlier.
HSBC's CET1 ratio ended September 30 at 15.9%, unchanged on a year earlier.
Its cost efficiency ratio was 66.5% in the third quarter, compared to 67.4% a year before.
CEO Quinn continued: "While we retain a cautious outlook on the external risk environment, we believe that the lows of recent quarters are behind us. This confidence, together with our strong capital position, enables us to announce a share buyback of up to USD2 billion, which we expect to commence shortly."
Turning to the bank's units, HSBC's Wealth & Personal Banking adjusted pretax profit rose to USD1.90 billion from USD1.44 billion, while Commercial Banking increased to USD1.97 billion from USD1.21 billion and Global Banking & Markets adjusted profit rose to USD1.42 billion from USD1.25 billion.
Regionally, HSBC's Asia operation continue to be its profit driver.
Statutory pretax profit in Asia rose to USD3.30 billion from USD3.19 billion, while in Europe profit surged to USD1.14 billion from just USD84 million. In Latin America, profit doubled to USD222 million, while operations in North America and Middle East & North Africa returned to profit after a loss the year before. In North America, HSBC recorded profit of USD358 million and USD378 million in the MENA region.
In the first nine months of 2021, HSBC's group pretax profit more than doubled to USD16.24 billion from USD7.39 billion, while revenue fell 2.9% to USD37.56 billion from USD38.67 billion.
Looking ahead, HSBC said: "The revenue outlook is becoming more positive, with fee growth across many of our businesses and a stabilisation of net interest income, which we expect to begin to increase in the coming quarters from lending growth and earlier than anticipated policy rate rises.
"We remain well placed to fund growth and step up capital returns, and now intend to normalise our CET1 position to be within our 14% to 14.5% target operating range by the end of 2022. We intend to achieve this through a combination of growth and capital returns, as well as from an expected USD20 billion to USD35 billion uplift in risk-weighted assets in 2022 due to regulatory developments. Given our strong capital position and notwithstanding growth opportunities available to us, we intend to initiate a share buyback of up to USD2 billion, which we expect to commence shortly."
By Paul McGowan; paulmcgowan@alliancenews.com
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