HSBC reported stronger profit growth than expected for the third quarter as all three of the bank's main businesses enjoyed good growth and progress was made with cost cutting efforts.
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Profit before tax for quarter of $5.9bn was 28% higher than the same quarter last year, beating the $5.6bn average analyst forecast, with adjusted PBT up 16% to $6.19bn to top the expected $5.8bn. For the first nine months of the year adjusted PBT is up 4% to $41.4bn.
Profit growth was enabled by a 6.3% increase in revenues in the quarter to £13.8bn, slightly higher than expected, thanks to higher interest rates and growth in deposits, notably in Hong Kong. Profits were better than analysts expected even despite the bank taking a charge in the period "reflecting concerns over possible impacts of escalating tariffs and other trade restrictions, primarily in Hong Kong" and a $145m hit relating accounting for hyperinflation in Argentina.
Retail banking revenues swelled 14% as wider margins and balance growth in current accounts, savings and deposits offset squeezed mortgage lending conditions in Hong Kong and the UK. Revenues in commercial banking were up 15%, as chief executive John Flint said the bank used the benefits of past investment to grow lending and deposit balances in both divisions.
In investment banking, revenues were up 10% thanks to a demand for transaction banking and foreign exchange.
As with his predecessor, Flint is hunting positive cost-to-income 'jaws', the banking term for when revenue growth rate exceeds the rate of cost growth. Adjusted jaws have improved to -1.6% after nine months of the year, from -5.6% in the first half of the year.
"These are encouraging results that demonstrate the revenue potential of HSBC," Flint said. "We are doing what we said we would - delivering growth from areas of strength, and investing in the business while keeping a strong grip on costs."
Flint said the strong growth in revenue continued to "enable us to invest in growth and in the simplification of the organisation".
The capital base improved, with the common equity tier 1 ratio rising to 14.3% from 14.2% three months earlier, while the leverage ratio remained at 5.4%.
Flint made no change to the HSBC's guidance, continuing to target positive statutory jaws for the full year and return on tangible equity of >11% by 2020, versus 10.1% reported in the year to date. ■