Highlights for the nine months ended 30 September 2011
- Reported profit before tax ('PBT') for the third quarter of 2011 ('3Q11') was US$7.2bn, up US$3.6bn on 3Q10, and for the nine months ended 30 September 2011 ('the nine months') was US$18.6bn, up US$4.0bn on the same period in 2010. These results included US$4.1bn of favourable movements in credit spread on the fair value of our own debt recognised in the quarter and US$4.0bn for the nine months.
- Underlying PBT for 3Q11 was US$3.0bn, down US$1.6bn on 3Q10 due to decreased revenues in Global Banking and Markets, an adverse movement in non-qualifying hedges of US$0.7bn (US$1.3bn recorded in the quarter and US$0.6bn in 3Q10), and an increase in loan impairment charges, primarily in North America, partially offset by increased revenues in Commercial Banking globally.
- Underlying PBT for the nine months was US$14.4bn, down US$0.3bn on 2010, reflecting the decreased revenues in Global Banking and Markets and higher costs offset by significantly lower loan impairment charges, principally in North America, and growth in Commercial Banking revenues.
- Annualised return on average ordinary shareholders' equity for the nine months was 12.6%, benefiting from the gains on movements in credit spread on the fair value of our own debt.
- Material progress has been made in implementing the strategy announced in May. Fourteen transactions have been announced so far this year, with 11 since 30 June 2011. Year to date, we have made good progress in expanding our Commercial Banking business across both developed and faster-growing markets and repositioning Retail Banking and Wealth Management.
- The reported cost efficiency ratio for the nine months worsened to 54.6% from 54.0% in 2010, and to 59.1% from 54.4% on an underlying basis. Operating expenses and full-time equivalent staff numbers ('FTEs') for 3Q11 were down on the preceding quarter, with FTEs down 5,000 since 1Q11.
- The core tier 1 capital ratio was 10.6% at 30 September 2011.
Group Chief Executive, Stuart Gulliver, commented:
"The sector faces significant headwinds. The continuing macroeconomic, regulatory and political uncertainty, particularly in Europe, adversely affected our industry's performance in the quarter. As a result, our underlying PBT declined by US$1.6bn compared with 3Q10 due to lower revenues in Global Banking and Markets, an adverse movement in non-qualifying hedges and an increase in loan impairment charges, primarily in North America, partially offset by increased revenues in Commercial Banking. Reported PBT was up US$3.6bn compared with 3Q10. Against this backdrop, HSBC remains resilient, with a strong balance sheet and robust liquidity.
"We have remained focused on implementing the strategy outlined in May, and have increased the pace and intensity of delivery. We have announced 14 transactions this year, including 11 since 30 June 2011, we have begun to turn the corner on costs, with operating expenses and FTEs falling compared with the previous quarter, and we continue to invest for growth in faster-growing markets.
"We have made progress in executing our strategy and, despite challenging market conditions, our businesses in Rest of Asia-Pacific and Latin America, notably Brazil, Commercial Banking in most markets and our retail banking operations in the UK have performed well. Notwithstanding the very difficult market conditions, a number of Global Banking and Markets businesses, notably Foreign Exchange, Equities and Payments and Cash Management, have made good progress in line with our investment focus."
Execution of strategy
Our strategy is designed to deliver our ambition to become the world's leading international bank. We are implementing it by building on our distinctive presence in the network of markets which generate the major trade and capital flows, capturing wealth creation where relevant and focusing on retail banking only where we can achieve profitable scale.
We have made progress in executing our strategy.
- Firstly, we continue to reshape our business portfolios to improve capital deployment based on our five filters, and maintain our expansion in faster-growing markets. Since 30 June 2011, we have announced transactions for the disposal of our US Cards business, 195 non-strategic branches principally in upstate New York, the Canadian investment advisory business, the Chilean retail banking business, the UK motor insurance business, private equity businesses in the US and Canada and our Hungarian consumer finance portfolio. We have also announced the reshaping of a number of our retail businesses in the Middle East and the exit from operations in Georgia and from retail banking operations in Poland.
- Secondly, we have taken steps towards our target of delivering US$2.5-3.5bn of sustainable cost savings by the end of 2013. Our programmes to review head offices and global functions are progressing well. Since 1Q11, FTEs have decreased by 5,000. We have identified a significant pipeline of sustainable savings and remain confident that we can hit our target range.
- Thirdly, we continue to position the business for growth, building on our connectivity and our capabilities in faster-growing markets, wealth management and global trade. During the quarter we increased revenues in Asia and Latin America on 3Q10 as a result of strong asset growth in late 2010 and the first half of 2011, notably in Commercial Banking and Global Banking and Markets, reflecting our focus on investing in regions with higher returns.
Interim Management Statement announcement Q3 2011