HSBC profit misses estimates on costs, to buy back $3 billion of shares

HSBC Holdings reported on Monday a 240 per cent increase in third-quarter pre-tax profit as higher interest rates boosted the bank's profitability and helped it fund a fresh $3 billion share buyback. The results from Europe's biggest bank showed the pressure it is under to deliver to long-suffering investors now that interest rates worldwide are rising, as its profit more than doubled in the third quarter nonetheless missed analysts' expectations because of higher costs.

HSBC also indicated costs are likely to increase by 4 per cent this year, more than its previous goal of a 3 per cent rise, as technology and operating spending grows and it considers a boost to staff bonuses in the fourth quarter.

The bank posted a pre-tax profit of $7.7 billion for the July to September quarter, versus $3.2 billion a year earlier, but the result trailed the $8.1 billion mean average estimate of brokers compiled by HSBC.

The London-headquartered bank with a market value of $118.6 billion said it aimed to complete the share buyback by next February, lifting the total buybacks announced this year to $7 billion.

It also dished out the third interim dividend payout this year of 10 cents per share, bringing the total payout to 30 cents per share.

HSBC's third-quarter net interest margin of 1.70 per cent was squeezed by 2 basis points compared with the prior quarter, reflecting an increase in customers migrating their deposits to term products, particularly in Asia.

In the third-quarter results, the lender booked a $500 million impairment related to the commercial real estate sector in mainland China.

"We continue to monitor risks related to our exposures in mainland China’s commercial real estate sector closely, and there remains a degree of uncertainty in the forward economic outlook, particularly in the UK," the company said in the results statement.

HSBC's Asia-focused competitor Standard Chartered reported last week an unexpected one-third plunge in third-quarter profit due to a nearly $1 billion combined hit from its exposure to China's real estate and banking sectors.