HSBC’s third quarter results cheered stock market sentiment in the UK today as the FTSE responded positively.
Profit before tax (PBT) was up at just over $4.5bn and reported profit for the 9 month period was up on the same period in 2012 at $18.5bn, with the UK and Hong Kong contributing more than half of the total.
Annualised return on equity improved by a full 1.5 percentage points to 10.4%, helped by a 4% fall in operating expenses.
The business grew stronger through a combination of revenue growth and disciplined cost management despite increasing compliance heads by 1600 group wide as a response to the issues with AML uncovered in America. Capital strengthened to 13.3% of core tier 1 capital although continuing regulatory uncertainty was flagged in the report. Improving global conditions again improved loan impairments, a common feature in this bank reporting round.
Insights into business confidence were contained in CEO Stuart Gulliver’s business performance review accompanying the results where he commented that:
“We see reasons for optimism with some evidence of a broadening recovery. Indications are that economic growth in mainland China is stabilising with positive implications for Hong Kong and the rest of Asia-Pacific. The US should continue to grow, albeit at a low rate by historical standards. The UK should see positive growth and outperform the eurozone. We expect GDP growth in Latin America to remain slow, although the Mexican economy should strengthen in 2014. Our forecasts for global growth remain constant at 2.0% in 2013 and 2.6% in 2014.
We remain focused on delivering organic growth, streamlining the business."
HSBC is, despite the steady stream of divestments of peripheral businesses (it has just exited Panama) still a Global Mega bank, and it’s improved performance and positive outlook were enough to lift the FTSE overall.
Like all major banks it has to navigate a difficult and unpredictable environment in regulatory terms, but appears to be doing this effectively whilst pursuing it’s traditional strategy of solid revenue growth and careful cost management.