BEIJING – HSBC reported on Monday a 24 percent drop in its third-quarter profit due to “challenging market conditions,” predicting “softer” than previously anticipated revenue growth outlook.
In its Q3 earnings release, the bank, Europe’s biggest by assets, said its “performance was not acceptable, principally business activities within continental Europe, the non-ring-fenced bank in the UK, and the US.”
“We are therefore accelerating plans to remodel them, and move capital into higher growth and return opportunities,” said the company’s CEO, Noel Quinn.
In Asia, the bank’s main market, HSBC’s revenue grew by 4 percent year-on-year with a “resilient performance” in Hong Kong, whose government has estimated a growth of between 0 and 1 percent of the city’s gross domestic product in 2019 owing to “strong economic headwinds” which would propel it into a technical recession.
“Profit attributable to ordinary shareholders in 3Q19 (is) down 24 percent to $3 billion, reflecting challenging market conditions,” the bank statement said.
The bank reported that its pre-tax profit was $4.8 billion, 18 percent less than in the third quarter of 2018, while adjusted profit before tax declined 12 percent to $5.3 billion.
Revenue before tax decreased 3 percent to $13.4 billion on account of “lower client activity in global markets,” according to the lender.
Meanwhile, HSBC’s adjusted revenue fell 2 percent to $13.3 billion in the third quarter of the year.
According to the bank, the conditions for revenue generations were “more challenging than in the first half of 2019” and the outlook for revenue growth was “softer” than anticipated in the first half of the year.
“As a result, we no longer expect to reach our RoTE (return on tangible equity) target of more than 11 percent in 2020,” the statement said.
“We will act to rebalance our capital away from low-return businesses and adjust the cost base in line with the actions we take.”
The group warned that all these measures could lead to “significant charges” in the last quarter of the year including the “possible impairment of goodwill and additional restructuring charges.”
However, it added that if it managed to address the problem of low-return businesses and reduce risk-weighted assets, it would be able to redeploy capital and resources into “higher growth and return opportunities.”