HSBC reports third quarter pre-tax profit of $4.6 billion, up from $843 million a year ago

Key Points
  • Europe's largest bank, HSBC, said Monday its third-quarter pre-tax profit jumped 448 percent year-on-year to $4.6 billion
  • HSBC also said it completed 71 percent of the $2 billion share buyback it announced in July
  • The bank is listed in Hong Kong, London and New York
Logo of HSBC bank
Adam Jeffery | CNBC

HSBC, Europe's largest bank, said Monday its pre-tax profit jumped 448 percent year-on-year in the three-months ended September.

The bank's third-quarter pre-tax profit was $4.62 billion, surging from $843 million in the same period a year ago. Adjusted revenue was 3 percent higher year-on-year at $13 billion.

"We maintained good momentum in the third quarter," Stuart Gulliver, HSBC's group chief executive, said in a statement. "Our international network continued to deliver strong growth in the third quarter, and our pivot to Asia is driving higher returns and lending growth, particularly in Hong Kong."

Asia was the key growth driver in loans, insurance and wealth management, the bank said. The region accounted for 87 percent, or around $4 billion, of HSBC's third-quarter pre-tax profit and is what differentiates the bank from its European peers, said Martin Smith, head of markets analysts at East & Partners.

"At a time when Brexit uncertainty is still very much front and center for all of the banks, generating more than half of the bank's profit from Asia is very much a positive for (HSBC)," Smith told CNBC before the release of the bank's third-quarter earnings.

HSBC shares in Hong Kong were up 1.1 percent on the day by 11:59 HK/SIN following the release of its latest financial statement. The bank has risen some 24 percent this year, helping the to outperform many of its regional peers.

Analysts had expected the bank, which is listed in Hong Kong, London and New York, to report an increase in third-quarter pre-tax profit and revenue, helped by the continuous cost-cutting effort and a low base from a year ago.

HSBC may report higher non-performing loans in the latest earnings

"I think on a year-on-year basis there will be multiple jumps on profit because of the low base last year, which was, in turn, caused by a one-off expense last year. But on a quarterly basis, the third-quarter profit will probably be lower than the second quarter due to decline in income and some jump in the provisions for bad loans," Ivan Li, research director at DBS Vickers Hong Kong, told CNBC before the release.

The bank's third quarter 2016 reported pre-tax profit came in at $843 million and adjusted revenue was at $12.8 billion. In the first half of this year, the bank beat estimates with a pre-tax profit of $10.24 billion and revenue of $26.1 billion — a performance that helped HSBC shares climb in all three listings.

HSBC's latest financial statement showed once again the company's ability to pick itself up after the global financial crisis. In addition to shifting its focus to Asia, the bank also scaled back some of its operations, including selling its Brazilian business.

The bank has also been able to maintain its capital buffers and dividends despite multiple rounds of share buyback programs.

Gulliver, instrumental in that turnaround, will step down as CEO in February next year. He will be replaced by John Flint, currently head of the bank's retail and wealth management arm, the company said earlier this month.

The announcement came just days after former AIA chief executive Mark Tucker took over the role of HSBC's chairman, replacing Douglas Flint.

Notwithstanding the management changes, HSBC will press on with its current growth momentum driven by its Asian strategy, group finance director Iain Mackay told CNBC. The bank's pivot to the region is centered around China's Pearl River Delta, where it has committed billions in investments.

"This is a market that is extremely important to us, we've seen good growth coming through over the course of the last 12 months ... This is an important area to us, we'll continue to invest there and hopefully continue to grow and see profitability build," Mackay said.