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HSBC Q3 Pre-Tax Earnings Up on Higher Revenues, Costs Rise
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HSBC Holdings (HSBC - Free Report) recorded third-quarter 2018 pre-tax profit of $5.9 billion, up 28.2% year over year. The increase was due to rise in revenues.
Further, net income attributable to shareholders of $3.9 billion reflects 31.8% rise from the year-ago quarter.
During pre-market trading, HSBC’s shares gained 4.8% on the NYSE. Notably, the actual picture will emerge after the full day’s trading session, once investors and analysts go through the core results.
Results were adversely impacted by rise in operating expenses as the company continued to invest in growth programs. On the other hand, higher revenues acted as a tailwind. Further, capital ratios remained strong.
Revenues Improve, Expenses Rise
Adjusted total revenues of $13.8 billion grew 8.8% year over year. The upswing reflects higher revenues in mostly all global businesses, partially offset by lower revenues in Corporate Centre and Global Private Banking.
Adjusted total operating expenses rose 2% from the prior-year quarter to $7.7 billion. This underlines rise in investments for business growth programs.
Quarterly Performance by Business Lines on an Adjusted Basis
Retail Banking and Wealth Management: The segment reported $2.1 billion in pre-tax profit, up 24.7% year over year. This upside was driven by higher revenues, partially offset by rise in operating expenses.
Commercial Banking: The segment reported pre-tax profit of $1.9 billion, increasing 16.6% from the year-ago quarter. The rise largely stemmed from solid revenues.
Global Banking and Markets: Pre-tax profit of $1.8 billion for the segment increased 20.7% from the prior-year quarter. The increase was primarily due to higher revenues, partly offset by elevated operating expenses.
Global Private Banking: Pre-tax profit for the segment was $95 million, up 72.7% from the year-ago quarter. The increase was largely due to declining expenses.
Corporate Centre: The segment recorded a pre-tax profit of $303 million, down 36.5% from the prior-year quarter. Lower revenues were largely responsible for the dismal segment performance.
Capital Ratios
Common equity Tier 1 ratio (transitional) as of Sep 30, 2018, was 14.3%, down from 14.5% as of Dec 31, 2017. Further, leverage ratio was 5.4%, down from 5.6% as of Dec 31, 2017.
Our Viewpoint
By disposing of unprofitable/non-core operations, HSBC has been successful in its strategy to enhance efficiency. However, weak European and Chinese economies, low loan demand and litigation expenses will continue to curb the bank’s near-term growth. Furthermore, mounting operating expenses are expected to impede its bottom-line performance to some extent.
HSBC Holdings plc Price, Consensus and EPS Surprise
UBS Group AG (UBS - Free Report) reported third-quarter 2018 net profit attributable to shareholders of CHF 1.2 billion ($1.2 billion), up around 31.7% from the prior-year quarter. Results display rise in net fee and commission income (up 3% year over year) and lower net interest income (down 4% year over year). Further, the company’s performance in the quarter reflects lower expenses.
Deutsche Bank AG (DB - Free Report) reported net income of €229 million ($267.4 million) in third-quarter 2018, which tanked 64.7% from year-ago quarter. Income before taxes plunged 45.8% to €506 million ($590.9 million). Lower revenues and higher expenses were the key undermining factors. Notably, net asset outflows were recorded during the quarter. However, strong capital position and lower provisions were the main positives.
Barclays (BCS - Free Report) reported third-quarter 2018 net income attributable to ordinary equity holders of £1 billion ($1.30 billion). This reflects improvement from net income attributable to ordinary equity holders of £583 million ($792.6 million) recorded in the prior-year quarter. Results were driven by improvement in trading activities and decline in credit impairment charges. However, fall in net interest income and higher expenses acted as headwinds.
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HSBC Q3 Pre-Tax Earnings Up on Higher Revenues, Costs Rise
HSBC Holdings (HSBC - Free Report) recorded third-quarter 2018 pre-tax profit of $5.9 billion, up 28.2% year over year. The increase was due to rise in revenues.
Further, net income attributable to shareholders of $3.9 billion reflects 31.8% rise from the year-ago quarter.
During pre-market trading, HSBC’s shares gained 4.8% on the NYSE. Notably, the actual picture will emerge after the full day’s trading session, once investors and analysts go through the core results.
Results were adversely impacted by rise in operating expenses as the company continued to invest in growth programs. On the other hand, higher revenues acted as a tailwind. Further, capital ratios remained strong.
Revenues Improve, Expenses Rise
Adjusted total revenues of $13.8 billion grew 8.8% year over year. The upswing reflects higher revenues in mostly all global businesses, partially offset by lower revenues in Corporate Centre and Global Private Banking.
Adjusted total operating expenses rose 2% from the prior-year quarter to $7.7 billion. This underlines rise in investments for business growth programs.
Quarterly Performance by Business Lines on an Adjusted Basis
Retail Banking and Wealth Management: The segment reported $2.1 billion in pre-tax profit, up 24.7% year over year. This upside was driven by higher revenues, partially offset by rise in operating expenses.
Commercial Banking: The segment reported pre-tax profit of $1.9 billion, increasing 16.6% from the year-ago quarter. The rise largely stemmed from solid revenues.
Global Banking and Markets: Pre-tax profit of $1.8 billion for the segment increased 20.7% from the prior-year quarter. The increase was primarily due to higher revenues, partly offset by elevated operating expenses.
Global Private Banking: Pre-tax profit for the segment was $95 million, up 72.7% from the year-ago quarter. The increase was largely due to declining expenses.
Corporate Centre: The segment recorded a pre-tax profit of $303 million, down 36.5% from the prior-year quarter. Lower revenues were largely responsible for the dismal segment performance.
Capital Ratios
Common equity Tier 1 ratio (transitional) as of Sep 30, 2018, was 14.3%, down from 14.5% as of Dec 31, 2017. Further, leverage ratio was 5.4%, down from 5.6% as of Dec 31, 2017.
Our Viewpoint
By disposing of unprofitable/non-core operations, HSBC has been successful in its strategy to enhance efficiency. However, weak European and Chinese economies, low loan demand and litigation expenses will continue to curb the bank’s near-term growth. Furthermore, mounting operating expenses are expected to impede its bottom-line performance to some extent.
HSBC Holdings plc Price, Consensus and EPS Surprise
HSBC Holdings plc Price, Consensus and EPS Surprise | HSBC Holdings plc Quote
Currently, HSBC has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Competitive Landscape
UBS Group AG (UBS - Free Report) reported third-quarter 2018 net profit attributable to shareholders of CHF 1.2 billion ($1.2 billion), up around 31.7% from the prior-year quarter. Results display rise in net fee and commission income (up 3% year over year) and lower net interest income (down 4% year over year). Further, the company’s performance in the quarter reflects lower expenses.
Deutsche Bank AG (DB - Free Report) reported net income of €229 million ($267.4 million) in third-quarter 2018, which tanked 64.7% from year-ago quarter. Income before taxes plunged 45.8% to €506 million ($590.9 million). Lower revenues and higher expenses were the key undermining factors. Notably, net asset outflows were recorded during the quarter. However, strong capital position and lower provisions were the main positives.
Barclays (BCS - Free Report) reported third-quarter 2018 net income attributable to ordinary equity holders of £1 billion ($1.30 billion). This reflects improvement from net income attributable to ordinary equity holders of £583 million ($792.6 million) recorded in the prior-year quarter. Results were driven by improvement in trading activities and decline in credit impairment charges. However, fall in net interest income and higher expenses acted as headwinds.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>