HSBC shares rise as bank shows progress in taming its costs

Bloomberg

HSBC Holdings Plc Chief Executive Officer John Flint delivered the kind of growth that investors have been waiting for.
Flint, who took over this year, succeeded in posting third-quarter revenue gains that outpaced expenses: adjusted rev- enue climbed 9 percent while costs increased 2 percent. The shares in Hong Kong jumped after falling close to a two-year low last week. The performa-nce bolsters Flint’s case that he can deliver profit growth for HSBC while spending billions of dollars on an expansion into key Asian markets and technology upgrades.
HSBC’s growth is broad-based and is “coming from a rising top line rather than simply cost-cutting, which can only deliver results for so long,” said Laith Khalaf, senior analyst at Hargreaves Lansdown. “HSBC may be the second biggest company on the UK stock market, but its profits are predominantly emanating from its historic home in the Far East.”
HSBC’s Hong Kong shares rose as much as 5.6 percent after the announcement, and were up 5 percent at 3:42 p.m. local time. HSBC shares in London also climbed 5 percent in early morning trade.
Adjusted pretax profit at HSBC’s global banking and markets unit increased 21 percent to $1.8 billion in the third quarter, compared with the $1.6 billion average estimate of analysts surveyed by Bloom-berg. HSBC has been making some changes at its investment bank and hired former top JPMorgan Chase & Co. banker Greg Guyett to jointly run the global banking division.
“We had a little bit of difficult press around that business and some of that suggested that there was something wrong with the strategy,” Finance Director Iain Mackay said in a phone interview on Monday. “It’s actually performing. We had a strong third quarter and just above everybody else.”
Adjusted pretax profit up 16% to $6.19 billion versus average estimate of $5.73 billion. Adjusted revenue rose 9% to $13.84 billion versus average estimate of $13.68 billion. Adjusted pretax profit at global banking & markets unit rose 21% to $1.8 billion. Retail banking & wealth management adjusted profit increased 25% to $2.1 billion.