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Brazilian disposal sees HSBC reported profits plunge 86% to £678m

Published 07/11/2016

Group chief executive Stuart Gulliver said the performance underscored the strength of HSBC's global network
Group chief executive Stuart Gulliver said the performance underscored the strength of HSBC's global network

HSBC saw pre-tax profits tumble 86% in the third quarter as it stomached a hefty hit from the disposal of its Brazilian business.

The banking giant said reported pre-tax profits hit 843 million US dollars (£678 million) in the three months to the end of September, down from 6.097 billion US dollars (£4.905 billion) over the period last year.

However, adjusted pre-tax profits beat expectations, rising 7% to 5.591 billion US dollars (£4.498 billion) in the third quarter, up from 5.240 billion US dollars (£4.215 billion) in 2015.

Group chief executive Stuart Gulliver said the performance underscored the strength of the bank's global network.

"Reported profits were down, but adjusted profits were higher than last year's third quarter in all four global businesses and four out of five regions.

"Reported profits included the impact of the disposal of our operations in Brazil, changes in the fair value of our own debt, and the costs of implementing our cost-reduction programmes."

Reported revenues also came under pressure in the third quarter, dropping to 9.512 billion US dollars (£7.653 billion) from 15.085 billion US dollars (£12.136 billion) in 2015.

The bank - which takes a large slice of its business from Asia - remained tight-lipped about who will replace group chairman Douglas Flint after announcing in March that the hunt had begun to find a successor ahead of his departure in 2017.

At the top of the new chairman's in-tray will be the search for a chief executive to replace Mr Gulliver.

HSBC confirmed last week that it was hiring former London Stock Exchange boss Dame Clara Furse as the chairman of HSBC UK, its ring-fenced bank based in Birmingham.

Shares in HSBC were up more than 4% in Hong Kong following the trading update.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: " HSBC's results show you can't make an omelette without breaking eggs, and the bank's efforts to refocus on its Asian roots have weighed down reported profits this quarter, thanks to a large loss resulting from disposal of its Brazilian operations.

"However the underlying business numbers from HSBC were pretty positive, with costs and revenues both heading in the right direction, and the bank's capital position improving significantly, though this was largely down to a change in regulatory requirements.

"Like the other UK banks, low interest rates are depressing returns on HSBC's lending activities, and there has been a jump in provisions for bad loans, though these remain at relatively low levels."

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