HSBC Q3 Profit Down, Sees Charges In Q4; Warns On FY20 RoTE Target; Stock Dips

(RTTNews) - Shares of HSBC Holdings Plc (HSBC, HSBA.L) were losing around 2 percent in Hong Kong trading after the Asia-focused lender reported Monday weak profit in its third quarter with charges and lower revenues, despite growth in Asia.

Looking ahead, the company said the revenue environment is more challenging than in the first half of 2019, and the outlook for revenue growth is softer than expected earlier. As a result, the company no longer expects to reach RoTE target of more than 11 percent in 2020.

Further, HSBC said it is accelerating plans to improve performance of weak businesses and move capital into higher growth and return opportunities. The company said its actions as well as possibility for continuing deterioration in the revenue environment could result in significant charges in the fourth quarter and subsequent periods.

The company also said it intends to sustain the dividend and maintain a CET1 ratio of above 14 percent.

Noel Quinn, Group Chief Executive, said, "Parts of our business, especially Asia, held up well in a challenging environment in the third quarter. However, in some parts, performance was not acceptable, principally business activities within continental Europe, the non-ring-fenced bank in the UK, and the US. Our previous plans are no longer sufficient to improve performance for these businesses, given the softer outlook for revenue growth."

For the third quarter, profit before tax declined 18 percent to $4.84 billion from last year's $5.92 billion. Profit attributable to ordinary shareholders fell 24 percent to $2.97 billion from $3.90 billion a year ago reflecting challenging market conditions. Earnings per share were $0.15, down from $0.19 a year ago.

Adjusted profit before tax was $5.35 billion, compared to $6.09 billion a year ago.

In the quarter, reported profit before tax in Asia grew 4 percent from last year to $4.7 billion, with a resilient performance in Hong Kong.

Revenues for the quarter declined 3 percent to $13.36 billion from $13.80 billion a year ago, due to lower client activity in Global Markets. Adjusted revenue was down 2 percent to $13.27 billion.

Commercial Banking and Retail Banking delivered revenue growth, while performance in Retail Banking and Wealth Management in HSBC UK was adversely impacted by additional customer redress charges. Global Banking and Markets performance continued to reflect low levels of client activity in Global Markets.

In Hong Kong, HSBC shares were trading at HK$60.30, down 2.19 percent.