HSBC profits fall 14% as bank presses ahead with restructuring

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HSBC’s profits declined 14 per cent in the third quarter as Europe’s largest lender presses ahead with a sweeping restructuring plan.

Pre-tax profits fell year on year to $7.3bn in the three months to September 30, with net income including credit impairments down to $16.8bn, below analyst expectations.

Operating expenses before amortisation, which include severance costs linked to chief executive Georges Elhedery’s restructuring, climbed 20 per cent to $9.1bn year on year in the quarter.

The bank set aside $1bn for expected credit losses, including from Hong Kong and Middle Eastern commercial property loans, slightly higher than last year and above analyst expectations.

“We are becoming a simple, more agile, focused bank, built on our core strengths,” said Elhedery. “The intent with which we are executing our strategy is reflected in our performance this quarter, despite taking legal provisions related to historical matters.”

Lebanese banker Elhedery took on the role of chief executive last year and kicked off a worldwide overhaul that included shutting HSBC’s investment bank in the US and Europe and pulling out of some markets.

In his first strategic move that involves spending money rather than cost-cutting, the UK-based lender, which generates the bulk of its profits in Asia, made a HK$106bn ($13.6bn) offer to buy out minority investors in Hong Kong’s Hang Seng Bank.

HSBC said on Monday it would set aside $1.1bn for a lawsuit brought by investors who lost money in Bernard Madoff’s multibillion-dollar Ponzi scheme after a Luxembourg court denied the bank’s appeal.

The provision lowered its common equity tier one capital ratio, a key measure of financial strength, by 0.15 percentage points.

This is a developing story