HSBC (HSBC) Monday signalled its pivot to Asia was paying rich dividends as quarterly profits leapt five-fold.
That lays a foundation for its new leadership to plan for growth after a tough period of post-crisis restructuring.
HSBC earlier this month chose Asia expert John Flint as its next chief executive, with its newly arrived chairman promoting an insider to drive revenue growth. Flint will take over as CEO in February 2018.
With Flint and another Asian veteran Chairman Mark Tucker at the helm, analysts expect the London-based bank’s shift toward its second home market of Asia to accelerate. Reported pretax profit for the Asia operations rose 10% during the third quarter to $4 billion.
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“We’ve got good momentum, we’re seeing good investor appetite for new business coming through not only in Hong Kong but further afield in Asia,” Group Finance Director Iain Mackay told Reuters.
Pretax profit was $4.6 billion in the September quarter, up from $843 million in the same period a year ago, HSBC said in a stock exchange filing. The profit was just short of analysts’ estimates of $4.7 billion. The year-ago profit had included a one-off loss of $1.7 billion from the sale of its Brazilian unit, and adverse foreign currency movements.
“Our international network continued to deliver strong growth … and our pivot to Asia is driving higher returns and lending growth, particularly in Hong Kong,” HSBC Group Chief Executive Stuart Gulliver said in the statement.
The bank makes more than half of its profits in Asia, with a particular focus on China’s Pearl River Delta region, which spans both Hong Kong and mainland growth hot spots as Shenzhen and Guangzhou.
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HSBC saw return on equity, a key measure of profitability, almost double to 8.2% in the first nine months of the year but it didn’t give a timeframe for achieving its long-term goal of 10%.
“We won’t achieve 10% by the end of 2017, but we are heading in the right direction,” Mackay said.
HSBC has been able to boost its capital buffer despite rolling out share buybacks, the latest of up to $2 billion in July, and sustaining dividends. Its customer base for retail banking and wealth management in mainland China had expanded by more than 70% so far this year, it said
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HSBC‘s common equity tier 1 ratio – a measure of financial strength – was 14.6% at the end of September, slightly lower than 14.7% at end-June this year, but in-line with analyst expectations.
The ratio is set to increase in the medium term, as the bank repatriates about $8 billion stuck at its U.S. subsidiary, following approval last year from the U.S. Federal Reserve.
HSBC said revenue in fixed income, currencies and commodities business fell by some 5% on the year during the quarter, which compares favorably with some of its European rivals: Barclays saw revenue from the same business fall by more than 20%.