HSBC shares yesterday rallied in a positive response to quarterly profit results after the British banking giant underwent a radical cost-cutting exercise.
In the three months to September, its adjusted pretax profit — which strips out one-off items and unfavorable currency movements — rose 7 percent from a year ago to US$5.59 billion, beating analysts’ expectations.
However, reported pretax profit plunged 86 percent from a year ago to US$843 million. That figure included the impact of the sale of the bank’s Brazil business, which set the lender back US$1.7 billion.
“Reported profits were down, but adjusted profits were higher than last year’s third quarter in all four global businesses and four out of five regions,” HSBC global chief executive Stuart Gulliver said.
HSBC last year announced a radical overhaul to cut annual costs by US$5 billion in two years by shedding 50,000 jobs worldwide, exiting unprofitable businesses and focusing more on Asia.
Gulliver said the bank had achieved US$2.8 billion in annualized savings so far and was on track to reach its target for the end of next year.
The bank’s balance sheet showed it continued to downsize in the US, selling US$900 million worth of consumer and mortgage lending assets.
Like most global lenders, HSBC has been struggling to boost profits as China’s economy slows and uncertainty caused by Britain’s looming exit from the EU casts a shadow over the sector.
On top of that, it has been grappling with more stringent capital rules, low interest rates as well as scandals stemming from its own misbehavior.
In the latest incident, a French prosecutor has called for the bank to stand trial for allegedly enabling French clients to hide more than 180 billion euros (US$199 billion) from the taxman, a source close to the probe said on Thursday last week.
If the case goes to trial, HSBC would face charges that its private banking division offered its customers several ways of hiding assets from the French tax authorities, notably via the use of offshore tax havens.
The September quarter adjusted profit topped the US$5.29 billion average estimate of five analysts surveyed by Bloomberg News.
Investors responded positively to the results with HSBC shares up 2.18 percent at HK$58.70 in afternoon trade in Hong Kong.
The bank posted a net loss of US$204 million for the September quarter, reversing a year-ago net profit of US$5.23 billion.
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