Growth in HSBC's wealth and personal banking divisions helped the bank's third-quarter financial results beat market expectations, enabling its new CEO to dismiss rumours about spinning off some units, as its stock soared to a six-year high.
The bank's restructuring plan, unveiled last week, "is not a precursor of an intent for the separation of our business", CEO Georges Elhedery said Tuesday on a call after the company released its earnings report.
Net profit rose 9 per cent to US$6.13 billion under international accounting rules in the quarter that ended on September 30, beating market forecasts to grow for the first time in four quarters. Total revenue increased by 5 per cent to US$17.21 billion.
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"We delivered another good quarter, which shows that our strategy is working", Elhedery said after delivering his first set of results since his promotion on September 2.
The lender announced a US$3 billion stock buy-back that is in addition to a US$6 billion repurchase programme unveiled earlier this year. It will also pay an interim dividend of 10 cents a share.
"There was strong revenue growth and good performances in wealth and wholesale transaction banking," Elhedery said. "Our strong organic capital generation enables us to announce a further US$4.8 billion of distributions [of dividends and buy-backs] in the third quarter, which brings the total distribution announced so far in 2024 to US$18.4 billion."
Strong contributions from wealth and private banking underscored Elhedery's restructuring since he took over from Noel Quinn. Effective January 1, the bank's four business lines will be: Hong Kong, the UK, corporate and institutional banking, and wealth and premier banking. HSBC said it is pursuing the restructuring to achieve greater operational efficiency and growth.
"What we have done is simplified our business governance ... making us simpler and faster at making decisions, and therefore better at empowering our own people to serve our customers and ultimately better service to our customers," Elhedery said.
The bank's restructuring plan revived speculation that HSBC would spin off its Asian business, an idea that has been pushed in the past by shareholders like China's Ping An Insurance, one of HSBC's largest.
HSBC CEO Georges Elhedery, left, on September 2. Photo: HSBC alt=HSBC CEO Georges Elhedery, left, on September 2. Photo: HSBC>
Last week, the lender said it was appointing Pam Kaur, currently the chief risk and compliance officer, as its first female chief financial officer.
At the same time, the lender will see three executive departures after December 31: Colin Bell, the CEO of HSBC Bank Plc and Europe, Stephen Moss, the CEO of Middle East and North Africa, and Steve John, the group chief communications and brand officer.
The positive results sent HSBC shares soaring to a six-year high; they advanced 3.1 per cent to HK$71.20 at the close on Tuesday.
Overall, HSBC's Asian business - including Hong Kong market and Hang Seng Bank - saw its pre-tax profit slide to US$5.1 billion from US$5.4 billion in the quarter before, though it was up 25.2 per cent from a year earlier.
Beijing's stimulus policies, unveiled in late September, led to "elevated volatility" at the end of the third quarter, which spurred an increase in client activity, notably in wealth, equities, and global foreign exchange in Hong Kong.
"We look forward the combination of these policy measures as well as policy measures taken in mainland China to revive the Mainland China economy, as well as the trajectory of rates going down and the positioning of Hong Kong give us enormous confidence in the output for Hong Kong to remain a very competitive platform." said Elhedery.
HSBC also said it would maintain "tight cost discipline" so it can generate savings that can be reinvested elsewhere in the business.
Pre-tax profit for its Asia wealth and personal banking segment rose to US$2.3 billion from US1.8 billion a year earlier.
Net interest margin (NIM), a measure of profitability, fell by 24 basis points from a year earlier to 1.46 per cent due to higher interest expenses on liabilities amid higher interest rates. Net interest income fell 17 per cent to US$7.6 billion from a year earlier.
In the company's wealth banking unit, customer accounts rose by US$15 billion. Growth was especially pronounced in Hong Kong, reflecting an increase in term deposits before interest rates started falling as well as short-term inflows into customer accounts amid volatility in equity markets.
In its commercial banking unit, there was an increase in customer accounts of US$6 billion. Growth there came mostly from the US and Hong Kong.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright ? 2024 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2024. South China Morning Post Publishers Ltd. All rights reserved.
