HSBC profits fall on French retail impairment charge

HSBC on Tuesday said pre-tax profit slipped more than 40 percent in the third quarter, with the bank citing an impairment on the planned disposal of its retail banking operations in France.

However results were better than analyst estimates and were boosted by rising interest rates making lending more profitable.

The Asia-focused giant said pre-tax profit fell by $2.3 billion to $3.1 billion on year while net profit dropped 46 percent to $1.91 billion.

In a statement to the Hong Kong stock exchange, HSBC said it was looking to offload its French retail arm “as part of our actions to simplify our operations” in Europe adding that it hoped the sale would go through in the second half of 2023.

While reclassifying the French division the bank “recognised an impairment of $2.4 billion”, which impacted the third-quarter figures.

But adjusted pre-tax profit rose 18 percent to $6.5 billion, beating Bloomberg News analyst estimates.

The bank’s net interest income, which measures what it makes from lending minus interest paid on deposits and is a key measure of profitability, came in at $8.6 billion, its best third quarter in more than eight years.

International banks face a mixed bag.

Rising interest rates make lending more profitable but at the same time much of the world is staring at a pronounced downturn.

“Macroeconomic headwinds, including higher inflation and a weaker outlook, continue to weigh on the global economy,” HSBC said, adding it had set aside more provisions against bad loans and had expected credit losses of $1.1 billion for July-September.

The bank specifically cited global uncertainty sparked by Russia’s invasion of Ukraine, the fall of the pound in Britain and the grim condition of China’s real estate sector.

– Hong Kong and China –

But chief executive Noel Quinn said the bank was focused on delivering a returns target of at least 12 percent for next year as well as keeping costs down.

“We retained a tight grip on costs, despite inflationary pressures, and remain on track to achieve our cost targets for 2022 and 2023,” he said in the earnings report.

HSBC is headquartered in London but makes the vast majority of its profits in Asia, especially China and Hong Kong.

The lender is under pressure from Ping An, which has a 9.2 percent stake, to spin off its Asian operations, in a bid to unlock shareholder value amid tensions between China and the west.

So far HSBC’s leadership have rejected those calls.

Senior executives from the bank are expected to be in Hong Kong next week for a bankers’ summit that is being hosted by the city, which only last month lifted mandatory quarantine for all international arrivals.

Over the weekend Chinese leader Xi Jinping tightened his grip on power by securing a third five-year term in office, handing top jobs to a number of loyalists who back his strict zero-Covid strategy.

The policy of lockdowns and other strict measures has been a major cause of the country’s economic woes and the prospect of more upheaval has sent chills through trading floors.

HSBC has vowed to accelerate a multi-year pivot to Asia and the Middle East, with ambitions to lead Asia’s wealth management market.

The bank said it would invest $6 billion in Hong Kong, China and Singapore and hire more than 5,000 wealth advisers — while slashing 35,000 jobs and cutting less profitable operations in other markets including France and the United States.

In Tuesday’s earnings report HSBC said it was “exploring the potential sale” of its Canadian division.

jta/dan