HSBC reports third-quarter results, beats analysts’ estimates

Europe’s largest bank by assets HSBC on Tuesday reported results for the third quarter of 2020. Although the bank beat estimates, it still reported a 36% year-on-year fall in its third-quarter pre-tax profit.

HSBC reported profit before tax of $3.07 billion in the quarter that ended September, beating analysts’ $2.07 billion, according to estimated compiled by the bank. In the same period a year before the bank reported $4.84 billion in pre-tax profits.

The bank’s reported revenue for the third quarter was $11.93 billion for the quarter, down 11% from a year ago.

The bank’s Chief Executive Noel Quinn in a statement said the third quarter’s results were “promising” amid the “continuing impacts of Covid-19 on the global economy.”

Highlights

HSBC’s performance during the 2020 third quarter improved from the previous two quarters, with pre-tax profits increasing in two of the bank’s global businesses.

• An additional $785 million was set aside for potential loan losses which brought the total provisions for the first nine months of the year to $7.64 billion. The bank said the total provisions for 2020 could be at the lower side of its $8 billion to estimates of $13 billion;

• Net interest margin for the quarter was 1.2%, down 13 basis points from the prior quarter and 36 basis points lower than 2019;

• Common equity tier 1 ratio for the quarter was 15.6% compared with the 15% in the prior quarter.

Following the report for the third quarter, shares of HSBC in Hong Kong rose by more than 4%. For the year, the bank’s Hong Kong-listed shares plunged by 47%, as of Friday. Its London-listed shares plunged 45.7 over the same period, according to data compiled by Refinitiv.

In the bank’s earnings call, the chief executive Noel Quinn said that he was pleased with the third quarter’s performance and “the way that our business and our people have continued to respond to a challenging environment.”

Before HSBC’s earnings release, Jackson Wong, asset management director at Amber Hill Capital said the bank’s prospects may improve if the coronavirus cases around the world do not continue to worsen.

“I think the worst probably could be over,” said Wong. “We haven’t seen a very bright future at this point so it could be (starting) to turn better, but it’s not very robust at this point yet.”

HSBC is particularly appealing to investors because of its steady dividend payments. Due to financial concerns over the coronavirus pandemic, British regulators have ordered commercial lenders to stop paying dividends to preserve capital.