Last checked at 
* Q3 pre-tax profit $4.8 bln versus $5.3 bln estimate
* Says does not expect to reach RoTE target of 11% in 2020
* Says H2 revenue outlook more challenging than in H1
* Shares fall 3%
(Adds London share reaction, investment bank performance)
By Sumeet Chatterjee and Lawrence White
HONG KONG/LONDON, Oct 28 (Reuters) - HSBC Holdings Plc
dropped its 2020 profit target, reported a sharp fall
in earnings and warned of a costly restructuring, as interim
Chief Executive Noel Quinn seeks to tackle its problems head-on
in his bid for the full-time role.
Quinn branded the lender's sluggish performance in Europe
and the United States as "not acceptable", but said investors
may have to wait until early next year to hear his full plans to
"remodel" Europe's biggest bank by assets.
The latest HSBC restructuring comes in a gloomy business
environment, including an escalating Sino-U.S. trade war,
Britain's protracted withdrawal from the European Union, an
easing monetary policy cycle, and unrest in Hong Kong.
HSBC reported pre-tax profit of $4.8 billion for the third
quarter on Monday, compared with the $5.3 billion average of
analysts' forecasts.
"Overall a poor set of results," said analyst Edward Firth
at broker KBW.
"But the good news is that this performance looks set to
finally goad the management into taking some of the actions to
address underperforming businesses that we have been awaiting."
The bank's shares fell 3% in London on Monday morning,
against a 0.5% dip in the STOXX European banks index.
The earnings update is HSBC's first under Quinn, and is
widely seen by shareholders and insiders as a report card on his
audition for the CEO role full-time.
"Our previous plans are no longer sufficient to improve
performance for these businesses, given the softer outlook for
revenue growth," Quinn said of the bank's U.S. and European
operations.
As a result of a "more challenging" revenue outlook compared
with the first half of the year, HSBC said it did not expect to
meet its return on tangible equity (RoTE) target of 11% in 2020.
HEADACHES
A veteran of the bank since 1987, Quinn, 57, has made it
clear he is keen to secure the permanent appointment of CEO from
Chairman Mark Tucker, who said in August the search to replace
the ousted John Flint would take six to 12 months.
One of Quinn's biggest headaches is HSBC's U.S. retail
banking business, which has struggled for years against much
bigger domestic rivals and where it booked a loss of $189
million in the first nine months of the year.
Some analysts have said the bank could look to shut down the
business, but Quinn dismissed the notion.
"You should not read into anything I've said that we are
looking to exit the retail bank in the U.S.," he said on Monday,
without ruling out scaling it back.
HSBC's investment bank is another sore spot, with profits
down 22% in the first nine months of the year.
Its trading businesses in particular had a tougher third
quarter than U.S. peers, with revenue down 22% in fixed income,
currencies and commodities, and down 26% in equities.
Quinn said the bank, which generates the bulk of its revenue
and profit in Asia, would shift capital away from low-return
businesses and further cut costs by simplifying HSBC's
notoriously complicated management structure.
"There is scope throughout the bank to clarify and simplify
roles, and to reduce duplication," Quinn told Reuters.
Such action could result in significant costs in the fourth
quarter and beyond, including the possible impairment of
goodwill and additional restructuring charges, the bank said.
HONG KONG PROTESTS
The near- to medium-term outlook for HSBC, and rival
Standard Chartered PLC, has also been clouded by
anti-government protests in Hong Kong, their single biggest
profit centre.
HSBC said its expected credit losses - including a "charge
to reflect the economic outlook in Hong Kong" - increased by
$400 million in the third quarter. Revenue for the first nine
months of the year in Hong Kong, however, rose 7%.
"Obviously the economy is getting impacted by two things -
the U.S.-China trade dispute and the protests," said Chief
Financial Officer Ewen Stevenson.
The bank is particularly monitoring its portfolio of small
business customers who may be feeling the strain, he added.
(Reporting by Sumeet Chatterjee in Hong Kong and Lawrence White
in London; Additional reporting by Alun John; Editing by
Christopher Cushing, Clarence Fernandez and Emelia
Sithole-Matarise)
