World Economy

HSBC Pretax Profits Jump

HSBC Pretax Profits Jump HSBC Pretax Profits Jump

HSBC Holdings Plc, Europe’s largest bank, reported a bigger-than-estimated jump in third-quarter profit as costs related to fines and legal settlements declined.

Pretax profit rose to $6.1 billion from $4.6 billion a year earlier as operating costs fell, the London-based lender said in a statement on Monday. Earnings on that basis exceeded the $5.2 billion average estimate of 14 analysts compiled by the bank. HSBC reiterated that a decision on its domicile may not come until next year, Bloomberg reported.

Chief Executive Officer Stuart Gulliver, 56, unveiled a three-year plan in June to pare back a sprawling global network, shut money-losing businesses and eliminate as many as 25,000 jobs after compliance costs surged. The third-quarter result benefited from a $1.4 billion decline from a year earlier in fines, settlements and redress for UK customers, while weakness in revenue capped earnings.

“The outlook for HSBC has become less negative,” Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong, said by phone. At the same time, Pang said a turnaround in the bank’s performance isn’t yet assured.

  Costs, Income

HSBC’s shares in Hong Kong fell 0.6%, compared with the benchmark Hang Seng Index’s 0.9% decline. The stock has fallen 18% this year.

Operating costs decreased 19% from a year earlier to $9 billion. That was below analysts’ average forecast of $9.4 billion. While net operating income fell 4% to $15.1 billion, that exceeded an average estimate of $14.8 billion.

“Our cost-reduction measures are beginning to have an impact,” Gulliver said. “There is more to achieve on costs and we expect the measures we have already taken to have a further impact in the fourth quarter.”

The bank, which has been generating more than two-thirds of its earnings in Asia, is assessing whether to move its headquarters away from London. Pretax profit in Asia rose 2% to $3.5 billion in the quarter from a year earlier.

Since taking over in 2011, Gulliver announced more than 87,000 job cuts, exited about 78 businesses and is close to finalizing the sales of its operations in Turkey and Brazil. In the UK, as many as 8,000 jobs will be cut, the CEO said in June.

HSBC reduced its risk-weighted assets by another $32 billion and is almost 30% of the way towards its target of reducing those assets by $290 billion by the end of 2017, Gulliver said in the statement.