HSBC third-quarter profit beats estimates, launches $3 billion buyback; shares jump

By Selena Li and Lawrence White

HONG KONG/LONDON (Reuters) -HSBC Holdings turned in a better-than-expected profit for the third quarter on rising wealth and wholesale banking revenue, while the market awaits anxiously for details of its newly announced major overhaul.

Hong Kong shares of the lender surged 3.7% on Tuesday to HK$71.60 ($9.21), highest since August 2018, after the lender announced the results and another share buyback plan.

HSBC's third-quarter profit rose 10% to $8.5 billion, ahead of estimates of $7.6 billion, as it benefited from slower-than-expected rate cuts.

The London-headquartered, Asia-focused bank also said it would buy back shares worth up to $3 billion, in addition to a $6 billion buyback programme announced earlier this year.

The lender unveiled a roadmap for its sweeping restructuring under new CEO Georges Elhedery designed to control costs and improve efficiency. HSBC announced last week that it will merge some operations and split its geographic footprint into East and West, under a new leadership structure.

"We will begin to implement these plans immediately," Elhedery said in an earnings statement, but further details will be disclosed in February next year.

The market is waiting to see how the overhaul impacts the bank in terms of costs and synergies. HSBC's new chief, who took the top job last month, has been tasked with controlling costs and running a global lender in a lower-rates environment.

Analysts hailed a "solid" set of earnings from the bank, but said HSBC needs to explain more about the financial implications of its overhaul.

"Rather than the generally good results, I think the focus in today's conference call will be on the structural overhaul and details on cost cuts from the new CEO and CFO," said Michael Makdad, Senior Equity Analyst at Morningstar.

HSBC kept its 2024 and 2025 near-term return on tangible equity goal - a performance target - at mid-teens for two years but said in the statement that the "the outlook for interest rates has changed, and been volatile".

The bank said it will pay an interim dividend of 10 cents a share, its third payout in 2024 following payments worth 41 cents announced earlier this year.

HSBC's revenue grew 5% in the quarter ended September to $17 billion from a year earlier, with volatile market conditions supporting higher customer activity in wealth products.

Foreign exchange, equities and global debt were the highlight for the markets business.



Its U.S. and European rivals have shown early signs of sustaining profitability with global central banks starting to move to cut rates. Barclays last week reported earnings that beat estimates, showing early promise in its bid to sustain income even as interest rates fall.

($1 = 7.7716 Hong Kong dollars)

Source: Investing.com