HSBC Holdings plc 3Q 2017 Earnings Release

Strategic execution

  • Completed 71% of the buy-back announced in July 2017, at 26 October
  • Further $13bn of RWA reductions in 3Q17, bringing the total reduction since the start of 2015 to $309bn
  • Achieved annualised run-rate savings of $5.2bn since our investor update, and remain committed to delivering positive adjusted jaws for 2017
  • Continue to make good progress with actions to deploy capital and invest:
    • Delivered growth from our international network with a 7% increase in transaction banking product revenue and a 14% rise in revenue synergies between global businesses compared with 9M16
    • Pivot to Asia generating returns and driving over 70% of Group adjusted profit in 9M17; 17% lending growth vs. 3Q16
    • Lending growth in Guangdong of $1.1bn vs. 3Q16
    • Maintained momentum in Asian Insurance and Asset Management, with annualised new business premiums and AuM up 13% and 17%, respectively, compared with 9M16

Stuart Gulliver, Group Chief Executive, said:

“We maintained good momentum in the third quarter, with higher revenue in our three main global businesses. We also continued to make good progress with the strategic actions we set out in 2015. Our international network continued to deliver strong growth in the third quarter, and our pivot to Asia is driving higher returns and lending growth, particularly in Hong Kong.”

Financial performance

  • Reported profit before tax for 9M17 of $14.9bn was $4.3bn or 41% higher than for 9M16, in part reflecting favourable movements in significant items, which included a loss on sale and trading results of the operations in Brazil that we sold on 1 July 2016; adjusted profit before tax of $17.4bn was $1.2bn or 8% higher than in 9M16, reflecting revenue growth, notably in RBWM and GB&M, and lower LICs, which were partly offset by an increase in operating expenses.
  • Reported revenue for 9M17 of $39.1bn was $0.2bn higher, as growth was partly offset by an adverse impact of foreign currency translation; adjusted revenue of $39.1bn increased by $1.1bn or 3%, reflecting higher revenue in RBWM and CMB due to higher average deposit balances and wider spreads in Asia, and higher revenue in GB&M across all of our businesses, which were partly offset by lower revenue in Corporate Centre and GPB.
  • Reported operating expenses for 9M17 of $25.0bn were $2.4bn or 9% lower due to a decrease in significant items; adjusted operating expenses of $22.4bn were $0.9bn or 4% higher, reflecting an increase in performance-related pay and investments in business growth programmes. The impact of our cost-saving initiatives broadly offset inflation and continuing investment in regulatory and compliance programmes.
  • Adjusted jaws for 9M17 was negative 1.3%.
  • Reported profit before tax for 3Q17 of $4.6bn was up $3.8bn compared with 3Q16, reflecting the net favourable effects of significant items; adjusted profit before tax of $5.4bn fell by $0.1bn. Compared with 2Q17, reported and adjusted profit before tax both fell by $0.7bn. Lower reported profit before tax reflected higher operating expenses, while the reduction in adjusted profit before tax reflected lower revenue in Corporate Centre and GB&M, as well as an increase in operating expenses.
  • Our capital base remained strong, with a common equity tier 1 (‘CET1’) ratio of 14.6% and a leverage ratio of 5.7%.

Review by Stuart Gulliver, Group Chief Executive

Business performance

Our businesses carried good momentum from the first half of the year into the third quarter. Reported profits were significantly higher than last year’s third quarter, in part reflecting the non-recurrence of a number of significant items. Growth in loans and advances translated into higher adjusted revenue in all three main global businesses compared with 3Q16, and our strong year-to-date revenue performance enabled us to accelerate investment in business growth. This contributed to an increase in operating expenses, which kept adjusted profits broadly stable relative to the same period last year.

Retail Banking and Wealth Management had a good quarter, with strong revenue growth from current accounts, savings and deposits, and further growth in loans and deposits in Hong Kong, the UK and Mexico. Commercial Banking benefited from another strong revenue performance from Global Liquidity and Cash Management, particularly in Asia. Global Banking and Markets continued to grow revenue despite a challenging quarter for the industry, demonstrating again the benefit of its differentiated business model. It achieved this largely through growth in Global Liquidity and Cash Management, Equities and Securities Services, which exceeded the impact of subdued market activity on our banking and fixed income businesses.

Our third-quarter costs rose relative to the same period last year as we accelerated investment to grow the business. This aims to reinforce the positive impact of targeted investment in previous quarters, particularly in Retail Banking and Wealth Management. Performance-related compensation also grew in line with profit before tax for the year to date. We remain committed to achieving positive jaws for the full year.

We had completed 71% of our most recent $2bn equity buy-back as at 26 October, and we expect to finish by the end of 2017.

Strategy execution

With fewer than three months remaining to implement the strategic actions we started in 2015, we continue to make good progress.

We generated a further $13bn of RWA savings in the quarter, taking us further beyond our initial target. Our RWA reduction programmes have extracted a total of $309bn of RWAs from the business since the start of 2015.

We remain on track to achieve around $6bn of annualised cost savings by the end of the year, and removed a further $0.6bn of costs in the third quarter.

Our international network continued to deliver strong growth in the third quarter, with all of our transaction banking products benefiting from higher balances and interest rate rises.

Our pivot to Asia is driving higher returns and lending growth, particularly in Hong Kong and the Pearl River Delta. Our Insurance and Asset Management businesses in Asia generated higher annualised new business premiums and assets under management, up 13% and 17% respectively for the first nine months of the year.

HSBC was named Best Overall International Bank for the Belt and Road Initiative at the Asiamoney New Silk Road Finance Awards in September.

Last week, HSBC became the first foreign bank to be approved as a joint-lead underwriter for Panda bond issuance by offshore non-financial corporates in the mainland China interbank bond market. This enables us to extend our coverage of debt-market products, and reinforces our position as the leading non-Chinese bank in mainland China.

For further information contact:

Investor Relations

Richard O’Connor
Tel: +44 (0) 20 7991 6590

Hong Kong
Hugh Pye
Tel: +852 2822 4908

Media Relations

Heidi Ashley
Tel: +44 (0) 20 7992 2045

Hong Kong
Gareth Hewett
Tel: +852 2822 4929

Rob Sherman
Tel: +1 (1) 212 525 6901

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