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HSBC Q3 Pre-Tax Earnings Decline as Revenues Fall, Costs Rise
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HSBC Holdings (HSBC - Free Report) recorded third-quarter 2019 pre-tax profit of $4.8 billion, down 18.3% year over year. The decline primarily resulted from a fall in revenues. Moreover, in the quarter, the company recorded customer redress charges of $606 million, which included provisions for payment protection insurance (“PPI”) of $388 million as well as other customer redress programs.
During pre-market trading, the company’s shares lost 3.5% on the NYSE. Notably, the actual picture will emerge after the full day’s trading session.
Results were hurt by a decline in net interest income as well as net fee income. Moreover, the company recorded marginally higher expenses in the quarter.
Revenues Decline, Expenses Rise Marginally
Adjusted total revenues of $13.3 billion declined nearly 1.6% year over year. The downside stemmed from lower net interest income as well as a decline in net fee income.
Adjusted total operating expenses rose marginally from the prior-year quarter to $7.5 billion.
Quarterly Performance by Business Lines
Retail Banking and Wealth Management: The segment reported $1.1 billion in pre-tax profit, down 45.5% year over year. The decline was due to higher expenses and lower revenues.
Commercial Banking: The segment reported pre-tax profit of nearly $1.6 billion, down 14.9% from the year-ago quarter. The decline was due to rise in operating expenses, partly offset by higher revenues.
Global Banking and Markets: Pre-tax profit of $1.2 billion for the segment declined 31.9% from the prior-year quarter. The decrease primarily resulted from lower revenues, partly offset by a decline in operating expenses.
Global Private Banking: Pre-tax profit for the segment was $182 million compared with $36 million recorded in the year-ago quarter. The improvement resulted from higher revenues and lower expenses.
Corporate Centre: The segment reported pre-tax profit of $711 million, up significantly from $159 million reported in the prior-year quarter. Rise in revenues and lower expenses were largely responsible for the improved performance.
Capital Ratios Stable
Common equity Tier 1 ratio (transitional) as of Sep 30, 2019, was 14.3%, unchanged from Sep 30, 2018. Leverage ratio was 5.4%, unchanged from the year-ago quarter.
Outlook
Because of the challenging economic backdrop, the company no longer expects to achieve return on tangible equity above 11% in 2020.
However, it expects to sustain dividend payouts and maintain a CET1 ratio above 14%.
Our Viewpoint
By disposing of unprofitable/non-core operations, HSBC has been successful in enhancing efficiency. Moreover, its initiatives to improve market share in the U.K. and China will likely support financials over the long term. However, weak European economy, uncertainty related to the impact of Brexit on financials and litigation expenses will continue to curb the bank’s near-term growth.
HSBC Holdings plc Price, Consensus and EPS Surprise
Performance & Upcoming Release Dates of Other Foreign Banks
Barclays (BCS - Free Report) reported third-quarter 2019 net loss attributable to ordinary equity holders of £292 million ($360 million). This reflects a decline from net income attributable to ordinary equity holders of £1.05 billion ($1.37 billion) recorded in the year-ago quarter.
Deutsche Bank (DB - Free Report) is slated to release results on Oct 30 and Itau Unibanco Holding S.A. (ITUB - Free Report) will report results on Nov 4.
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Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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HSBC Q3 Pre-Tax Earnings Decline as Revenues Fall, Costs Rise
HSBC Holdings (HSBC - Free Report) recorded third-quarter 2019 pre-tax profit of $4.8 billion, down 18.3% year over year. The decline primarily resulted from a fall in revenues. Moreover, in the quarter, the company recorded customer redress charges of $606 million, which included provisions for payment protection insurance (“PPI”) of $388 million as well as other customer redress programs.
During pre-market trading, the company’s shares lost 3.5% on the NYSE. Notably, the actual picture will emerge after the full day’s trading session.
Results were hurt by a decline in net interest income as well as net fee income. Moreover, the company recorded marginally higher expenses in the quarter.
Revenues Decline, Expenses Rise Marginally
Adjusted total revenues of $13.3 billion declined nearly 1.6% year over year. The downside stemmed from lower net interest income as well as a decline in net fee income.
Adjusted total operating expenses rose marginally from the prior-year quarter to $7.5 billion.
Quarterly Performance by Business Lines
Retail Banking and Wealth Management: The segment reported $1.1 billion in pre-tax profit, down 45.5% year over year. The decline was due to higher expenses and lower revenues.
Commercial Banking: The segment reported pre-tax profit of nearly $1.6 billion, down 14.9% from the year-ago quarter. The decline was due to rise in operating expenses, partly offset by higher revenues.
Global Banking and Markets: Pre-tax profit of $1.2 billion for the segment declined 31.9% from the prior-year quarter. The decrease primarily resulted from lower revenues, partly offset by a decline in operating expenses.
Global Private Banking: Pre-tax profit for the segment was $182 million compared with $36 million recorded in the year-ago quarter. The improvement resulted from higher revenues and lower expenses.
Corporate Centre: The segment reported pre-tax profit of $711 million, up significantly from $159 million reported in the prior-year quarter. Rise in revenues and lower expenses were largely responsible for the improved performance.
Capital Ratios Stable
Common equity Tier 1 ratio (transitional) as of Sep 30, 2019, was 14.3%, unchanged from Sep 30, 2018. Leverage ratio was 5.4%, unchanged from the year-ago quarter.
Outlook
Because of the challenging economic backdrop, the company no longer expects to achieve return on tangible equity above 11% in 2020.
However, it expects to sustain dividend payouts and maintain a CET1 ratio above 14%.
Our Viewpoint
By disposing of unprofitable/non-core operations, HSBC has been successful in enhancing efficiency. Moreover, its initiatives to improve market share in the U.K. and China will likely support financials over the long term. However, weak European economy, uncertainty related to the impact of Brexit on financials and litigation expenses will continue to curb the bank’s near-term growth.
HSBC Holdings plc Price, Consensus and EPS Surprise
HSBC Holdings plc price-consensus-eps-surprise-chart | HSBC Holdings plc Quote
Currently, HSBC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance & Upcoming Release Dates of Other Foreign Banks
Barclays (BCS - Free Report) reported third-quarter 2019 net loss attributable to ordinary equity holders of £292 million ($360 million). This reflects a decline from net income attributable to ordinary equity holders of £1.05 billion ($1.37 billion) recorded in the year-ago quarter.
Deutsche Bank (DB - Free Report) is slated to release results on Oct 30 and Itau Unibanco Holding S.A. (ITUB - Free Report) will report results on Nov 4.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>