UPDATE 2-HSBC flags challenging revenue outlook after missing Q3 profit forecasts

Sumeet Chatterjee and Lawrence White


* Q3 pre-tax profit $4.8 bln versus $5.3 bln estimates

* Says does not expect to reach RoTE target of 11% in 2020

* Says H2 revenue outlook more challenging than in H1 (Adds CEO comments, Hong Kong business details)

HONG KONG/LONDON, Oct 28 (Reuters) - HSBC Holdings PLC on Monday flagged a softer revenue growth outlook and dropped a key growth target for next year, after posting a more-than-expected 18% drop in quarterly pre-tax profit.

HSBC has been looking to step up cost-cutting efforts amid a gloomier business outlook brought about by an escalating trade war between China and the United States, an easing monetary policy cycle, unrest in its key Hong Kong market, and Brexit.

Pre-tax profit at Europe's biggest bank by assets was $4.8 billion for the third quarter ended Sept. 30, versus $5.9 billion a year earlier, HSBC said in a statement to the Hong Kong stock exchange.

The profit was lower than the $5.3 billion average of analysts' estimates compiled by the bank.

The Hong Kong-listed shares of HSBC fell more than 2% as trading resumed after the mid-day break.

The results are HSBC's first under interim Chief Executive Noel Quinn, and are widely seen by shareholders and insiders as a report card on his auditioning for the role full time. Quinn flagged more changes ahead for the bank on Monday.

"Parts of our business, especially Asia, held up well in a challenging environment in the third quarter," he said in the earnings statement.

"However, in some parts, performance was not acceptable... Our previous plans are no longer sufficient to improve performance for these businesses, given the softer outlook for revenue growth."

HSBC said it did not expect to meet its return on tangible equity target (RoTE) of 11% in 2020, citing a "more challenging" revenue outlook compared to the first half of this year.

The London-headquartered lender, which generates the bulk of its revenue and profit in Asia, said it would rebalance capital away from low-return businesses and adjust its cost base.

"These actions, or any continuing deterioration in the revenue environment, could result in significant charges in 4Q19 and subsequent periods, including the possible impairment of goodwill and additional restructuring charges."

Quinn, 57, has made no secret that he is keen to secure the permanent appointment from Chairman Mark Tucker, who said in August the search for a CEO would take six to 12 months.

A veteran of the bank since 1987, Quinn faces the tough task of showing progress on HSBC's key priorities of further cost reduction and turning around its perennially underperforming U.S. business.

The near- to medium-term outlook for the bank has also been clouded by the five month-old anti-government protests in Hong Kong, its single-biggest profit center.

Hong Kong is facing its first recession in a decade as increasingly violent protests continue.

Bankruptcy petitions presented by debtors in Hong Kong rose nearly a fifth in the September quarter to 1,945 versus the same period a year earlier, government data showed.

HSBC said its expected credit losses - including a "charge to reflect the economic outlook in Hong Kong" - increased by $400 million in the third quarter. Revenue for the first nine months of the year in Hong Kong, however, rose 7%.

(Reporting by Sumeet Chatterjee in Hong Kong and Lawrence White in London; additional reporting by Alun John; Editing by Himani Sarkar and Christopher Cushing)