(Alliance News) - Stock prices in London are seen opening lower on Monday after the market's second biggest stock, HSBC, reported a big drop in third-quarter profit, prompting a new business plan.
IG futures indicate the FTSE 100 index is to open 7.17 points lower at 7,317.30. The blue-chip index closed down 3.78 points, or 0.1% at 7,324.47 on Friday.
"HSBC missed analyst estimates in the third quarter and announced significant restructuring charges as part of its struggle with weakening global outlook. FTSE futures slipped following the HSBC's miss, hinting at a soft start in London," said London Capital Group's Ipek Ozkardeskaya.
The Asia-focused bank is London's second largest company by market captalisation behind oil major Royal Dutch Shell.
HSBC Holdings held its dividend Monday despite third-quarter profit and revenue suffering amid "challenging" conditions, in particular within its European and US businesses. For the third quarter, HSBC held its dividend unchanged at 10 US cents per share.
For the three months ended September, pretax profit narrowed 18% to USD4.84 billion from USD5.92 billion the year prior. Company-compiled analyst consensus expected the figure to come in at USD5.3 billion.
Third quarter operating income fell 3.2% to USD13.36 billion from USD13.80 billion the year before.
"Our previous plans are no longer sufficient to improve performance for these businesses, given the softer outlook for revenue growth," Chief Executive Officer Noel Quinn said. "We are therefore accelerating plans to remodel them, and move capital into higher growth and return opportunities."
Amid these "softer" conditions, HSBC now no longer expects return on equity of at least 11% to be achieved in 2020. The FTSE 100-listed bank will, therefore, focus on rebalancing its capital away from low-return businesses as well as adjust its cost base.
These changes could result in "significant" charges in the fourth quarter of 2019. Such costs would be related to goodwill impairments and additional restructuring charges.
HSBC shares were down 2.8% in Hong Kong.
The pound was quoted at USD1.2822 early Monday, slightly lower than USD1.2831 at the London equities close Friday.
UK Prime Minister Boris Johnson will likely fail to secure "super majority" support for a December general election - but knows he will require 100 fewer MPs to grant the same request just 24 hours later.
The prime minister's election bid on Monday, to be made under the Fixed-Term Parliaments Act, would require a two-thirds Commons majority - 434 MPs - to agree to an election on December 12.
Labour's lack of support for the proposal means it is likely to be defeated when voted upon on Monday evening. But the Liberal Democrats and Scottish National Party have offered Johnson a way out of the deadlock.
Johnson has already had two requests for an election refused. Lib Dem leader Jo Swinson and the SNP's Westminster leader Ian Blackford have put forward a tightly-drafted Bill that would grant an election on December 9 - three days earlier than the PM's suggested polling date - as long as the EU grant an extension until January 31.
With the SNP and Lib Dems supporting the initiative, the Bill is likely to pass even without Labour backing.
In the US on Friday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.6%, S&P 500 up 0.4% and Nasdaq Composite up 0.7%.
The Japanese Nikkei 225 index closed up 0.3%. In China, the Shanghai Composite is up 0.6%, while the Hang Seng index in Hong Kong is up 0.9%.
Ahead in the economic events calendar this week, the US Federal Reserve's two-day monetary policy meeting begins on Tuesday, with the interest rate decision due on Wednesday. The central bank is expected to announce its third interest rate cut of 2019.
In the UK earnings calendar this week are third-quarter results from oil majors BP on Tuesday and Shell on Thursday, drugmaker GlaxoSmithKline on Wednesday, and Lloyds Banking Group also on Thursday
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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HSBC Holdings (HSBA)
