HSBC profits jump 28 per cent as costs come down

Because the bank derives the majority of its profits from Asia, analysts warned it could be in for a bumpy ride if the US-China trade war escalates

The group has been trying to reduce spending in recent quarters (Reuters)

HSBC profits rose 28 per cent in the third quarter of this year, as the bank reined in spending.

The lender reported pre-tax profit of $5.9bn (£4.6bn), up from $4.6bn in the same period of last year, and higher than analysts’ expectations of $5.6bn.

Revenue also rose, by 6 per cent, to $13.8bn, although the bank said foreign currency translation movements knocked $300m off revenue growth.

Meanwhile, expenses were reduced by 2 per cent between the second and third quarter and revenue – spending fell to $7.7bn from $7.9bn.

John Flint, who was appointed as HSBC’s chief executive last year, taking up the role this February, said: “These are encouraging results that demonstrate the revenue potential of HSBC. 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.

“We remain committed to growing profits, generating value for shareholders and improving the service we offer our customers around the world.”

Naeem Aslam, chief market analyst at ThinkMarkets, said: “The key to satisfy the shareholders is to spend less and deliver higher growth numbers and, in today’s earnings report, HSBC has nailed this. The bank’s biggest challenge was to tame its cost.

“In its earnings report, the numbers across the board were encouraging.”

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “HSBC may be the second biggest company on the UK stock market, but its profits are predominantly emanating from its historic home in the far east. Three quarters of the bank’s profits so far this year have come from its Asian operations, leaving the European business trailing in its wake.

“Profit growth has been broad-based across HSBC’s main banking activities, and what’s positive is that’s coming from a rising top line rather than simply cost-cutting, which can only deliver results for so long. Indeed adjusted operating costs have actually ticked up, though that’s to support investment in growth opportunities, notably in the bank’s digital proposition.”

He added: “As an international retail and commercial bank, HSBC is clearly plugged into the global economy, and in particular the fortunes of China and the surrounding area. While in the long term this looks like an ace in the sleeve, investors should expect a bumpy journey, particularly if Trump’s trade war dents growth in the region.”

Shares in HSBC rose 4 per cent in early trading.