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Asian Business And Slower Loan Losses Help HSBC Beat Q3 Profit Estimates

Asian Business And Slower Loan Losses Help HSBC Beat Q3 Profit Estimates
Resilient performance from its Asian operations and with less money set aside to address issues of bad loans helped lender HSBC to report better-than-expected profit in the third quarter.
Previously, the biggest bank of Europe in terms of assets had said that it could set aside as much as $13 billion to offset future loan losses for the entire year of 2020 primarily because of dampening business activities caused by the economic hit of the novel coronavirus pandemic.
But while reporting third quarter results on Tuesday, the bank said it expected provisions for credit losses to be at the “lower end” of its $8 billion to $13 billion range that it had previously announced.  
Dependent on the economic outlook in early 2021 and after consultation with its regulators, it could shell out a “conservative” dividend for 2020, HSBC also said. In addition to cancelling its final dividend for 2019 in April, the bank had also suspended its dividend payments this year because of a call by the chief regulator in the United Kingdom. That decision had sparked rebellion among its Hong Kong shareholder base.
“These were promising results against a backdrop of the continuing impacts of Covid-19 on the global economy,” Noel Quinn, HSBC CEO, said in a statement. “I‘m pleased with the significantly lower credit losses in the quarter, and we are moving at pace to adapt our business model to a protracted low interest-rate environment.”
As part of a huge restructuring process in the bank that will include the potential loss of about 35,000 jobs, HSBC is also expecting to bring down its annual cost base beyond its original $31 billion target by 2022, said the bank which is headquartered in London but generates a major portion of its profit from its Asian business. Compared to the third quarter of last year, the bank had 10,000 jobs less in the company in the third quarter of the current year, including contractors, said HSBC.
Compared to a consensus estimate of $2.07 billion by analysts polled by the bank, HSBC reported a pre-tax profit of $3.07 billion, comfortably beating estimates. However in the same quarter a year earlier, the bank had reported a pre-tax profit of $4.84 billion.
A net profit of $1.36 billion for the third quarter was reported by the bank compared to $2.97 billion in the year ago third quarter. There was also a 7 per cent year on year decline in revenues for the third quarter at $15.9 billion while a 14.8 per cent drop in net interest income, at $6.45 billion, was also reported by the bank.
However issues such as historically low interest rates, uncertainty surrounding a second wave of the pandemic in many parts of the world and on-going geopolitical tensions between the United States and China prior to the crucial US presidential next week could also be strong head winds in the current year, the bank warned on Tuesday.

Christopher J. Mitchell

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