(30 October 2017 – Global) HSBC has reported that its recent Asia focus was pivotal to the bank’s third quarter profits jumping five-fold.
The bank named John Flint, who has a background in the region, 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.
“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 said.
The bank’s pretax profit was US$4.6 billion (A$5.99 billion) in the last quarter, up from US$843 million at the same period a year earlier. 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 a statement.
HSBC saw return on equity almost double to 8.2 percent in the first nine months of the year but it didn’t give a timeframe for achieving its long-term goal of 10 percent.
“We won’t achieve 10 percent 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
HSBC‘s common equity tier 1 ratio was 14.6 percent at the end of September, in line with expectations.
The ratio is set to increase in the medium term, as the bank repatriates about US$8 billion stuck at its US subsidiary, following approval last year from the Federal Reserve.
HSBC said revenue in fixed income, currencies and commodities business fell by around five percent on the year during the quarter, compared to EU rival, Barclays’ more than 20 percent decline.
Speaking to CNBC International prior to the earnings call, Martin Smith, Head of Markets Analysis at East & Partners Australia said, “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).”