(Alliance News) - Asian-focused lender HSBC Holdings PLC held its dividend Monday despite third quarter profit and revenue suffering amid "challenging" conditions, in particular within its European and US businesses.
For the three months ended September, pretax profit narrowed 18% to USD4.84 billion from USD5.92 billion the year prior. This was after operating income fell 3.2% to USD13.36 billion from USD13.80 billion the year before.
"Parts of our business, especially Asia, held up well in a challenging environment in the third quarter," HSBC Chief Executive Officer Noel Quinn said. "However, in some parts, performance was not acceptable, principally business activities within continental Europe, the non-ring-fenced bank in the UK, and the US."
In August, Quinn took the helm of HSBC after former CEO John Flint left the role after only a year and a half.
Return on tangible equity stood at 6.4% in 2019, lower than the 10.9% reported in 2018. The common equity tier one solvency ratio for HSBC in the third quarter of 2019 stood at 14.3%, unchanged on the year prior.
Adjusted jaws in 2019 fell to negative 2.4% from negative 1.6% 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.
"Our previous plans are no longer sufficient to improve performance for these businesses, given the softer outlook for revenue growth," Quinn added. "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 firm 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.
Despite this, HSBC remained committed to a CET1 ratio above 14% and to "sustain" its dividend. For the third quarter, HSBC held its dividend unchanged at 10 US cents per share.
By Ahren Lester; ahrenlester@alliancenews.com
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HSBC Holdings (HSBA)