HSBC Q3 profits fall but beat estimates after $2.4bn hit from French sale

The bank posted a pre-tax profit of $3.15bn for the three months to September. 30, down from $5.4bn last year, but above the $2.45bn consensus of analyst estimates compiled by the bank.

Results also included a $2.4bn hit from the sale of the bank's business in France as part of a pivot to Asia by HSBC in an effort to boost profits.

HSBC has come under pressure from its biggest shareholder, China's Ping An Insurance Group, to explore options including spinning off and listing its mainstay Asia business to increase shareholder returns.

The bank is also exploring a potential sale of its Canadian unit, as it tries to streamline operations in order to lift profits amid pressure from Ping An.

“We maintained our strong momentum in the third quarter and delivered a good set of results,” said chief executive Noel Quinn.

“We are focused on executing our plans and delivering our returns target of at least 12 per cent from 2023 onwards and, as a result, higher distributions to our shareholders.” However, the bank maintained its guidance for a dividend payout ratio of 50% in 2023 and 2024.

The surprise announcement was the appointment of Elhedery, who will replace Ewen Stevenson, due to step down at the end of this year.

Net interest income - the difference loan rates and interest on deposits - jumped by a third to $8.6bn in the third quarter. HSBC cashed in on surging interest rates, which are rising globally as central banks attempt to rein in inflation.

“Rising interest rates may be good news for banks but it’s all the other stuff which is causing them headaches right now," said AJ Bell analyst Danni Hewson.

“Concern about the impact of a slowing economy on bad debts and growth in the loan book is being exacerbated at HSBC by the departure of well-respected finance director Ewen Stevenson and the deteriorating situation in China."

“This explains HSBC serving up a better-than-expected set of third quarter numbers only to have the market effectively tell it to get stuffed."

“Stevenson had a good track record in his previous job helping to rehabilitate NatWest (formerly Royal Bank of Scotland) and shareholders will be disappointed not to have his steady hand at the tiller during the current turmoil."

“HSBC’s fortunes are increasingly tied to China and the rest of Asia so Xi Jinping’s power grab, which has created concern in international markets, particularly if it means a continuation of hard-line zero-Covid policies, is not helpful for sentiment towards the bank.”

Reporting by Frank Prenesti for Sharecast.com