HSBC Swings to Profit as Pivot to Asia Pays Off -- 2nd Update
October 30 2017 - 7:28AM
Dow Jones News
By Margot Patrick and Joanne Chiu
HSBC Holdings PLC swung to a third-quarter net profit and said
increased investment in its Asia business was paying off, with
revenue there rising.
The U.K. banking giant on Monday posted a $3.24 billion net
profit for the period versus a net loss of $204 million in the
comparable quarter of 2016, on revenue up 36% to $12.98 billion. On
a pretax basis, the bank's profit surged to $4.62 billion from $843
million a year ago.
Executives said there was strong growth in lending in Hong Kong
and mainland China, including in the Pearl River Delta area where
the bank has been staking out turf. Finance head, Iain Mackay, said
balances there had grown to over $1 billion from "a very small
base."
He said HSBC's new securities venture in China, underwriting
stocks and bonds and advising on mergers, would contribute to its
growing mainland business, albeit slowly and over time. The
securities venture, which is the first majority-owned by a foreign
bank, got the go-ahead from authorities in June.
HSBC Chief Executive Stuart Gulliver said the bank's
international network continued to deliver strong growth in the
third quarter, and its pivot to Asia was driving higher returns and
lending growth, particularly in Hong Kong.
Asia loans and advances grew 17% in the three months to Sept.
30, compared with the third quarter of 2016. Asia customer deposits
were $10.1 billion higher than at June 30. Across the bank, revenue
on retail deposits rose to $1.61 billion from $1.3 billion in the
third quarter of 2016.
The third-quarter results come after HSBC in late July reported
a 57% rise in net profit of $3.87 billion for the second quarter
amid improving loan growth and rising contribution from its other
businesses. The profit growth has helped the bank accrue surplus
capital and it has been returning some of it to shareholders by
buying back shares.
In an interview, Mr. Mackay said the bank still had around $10
billion of extra capital tied up in its subsidiaries, including
around $6 billion in the U.S. He said further buybacks would be
considered, "when the time is appropriate." Local regulators must
approve capital moving up to the group level.
HSBC was founded in Hong Kong in 1865 and is headquartered in
London. It considers Hong Kong and the U.K. to be its two home
markets.
Mr. Gulliver heralded a "pivot to Asia" in June 2015 as one of
the finishing touches to the bank's overhaul after the financial
crisis. During his time as CEO, starting in 2011, HSBC exited
dozens of businesses and withdrew from parts of the globe. Mr.
Gulliver said at the time that HSBC would aim to repeat its
historic growth in Hong Kong in China's emerging urban centers.
On Monday, Mr. Gulliver said HSBC had hit most of the targets he
set out in 2015 and that he aimed to have them all done when he
retires from the bank on Feb. 20, 2018.
Mr. Gulliver announced his resignation this year. A new
chairman, Mark Tucker, started in October and named retail head
John Flint as Mr. Gulliver's replacement.
One of the tasks set by Mr. Gulliver was to significantly
improve HSBC's processes and controls around preventing financial
crime. Raising its standards is a key condition of a five-year
deferred prosecution agreement the bank entered in 2012 with the
U.S. Department of Justice, while paying $1.9 billion in a
settlement over money-laundering allegations.
HSBC is awaiting news from the Justice Department on whether the
deferred prosecution agreement will expire or be extended.
Write to Margot Patrick at margot.patrick@wsj.com and Joanne
Chiu at joanne.chiu@wsj.com
(END) Dow Jones Newswires
October 30, 2017 07:13 ET (11:13 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
HSBC (NYSE:HSBC)
Historical Stock Chart
From Mar 2024 to Apr 2024
HSBC (NYSE:HSBC)
Historical Stock Chart
From Apr 2023 to Apr 2024