HSBC says it will continue to save costs by disposing of non-core businesses and focus on lending business in emerging markets, especially China.
The lender's underlying profit before tax rose 125 per cent to US$5 billion in the third quarter but was down 51 per cent on a reported basis, mainly because of an increase in the market value of the bank's own debt.
The bank said yesterday it lost about US$5.8 billion in the quarter because of adverse movements in the fair value of its own debt - a reflection of the market's increased risk perception of owning HSBC bonds.
The losses were partially offset by higher gains on business disposals, amounting to US$4.4 billion. Increased revenue from the global banking and markets businesses and commercial banking operations and lower loan impairment charges in North America also helped improve income.
"We have made significant progress in delivering our strategic priorities to simplify, restructure and grow HSBC," said chief executive Stuart Gulliver.
The bank made 24 disposals and closures this year, including eight since the end of June, making a total of 41 exits from non-strategic markets and businesses since the beginning of last year.
It recorded US$500 million of cost savings in the third quarter, taking the total annualised savings to US$3.1 billion. Gulliver said the bank was expected to exceed its target of saving US$2.5 billion to US$3.5 billion in costs in the 2011-13 period.
"We think these are a good set of numbers, with perhaps some shine taken off by the additional provision and lack of settlement on the ongoing US regulatory issues," said Mark Phin, an analyst at Keefe, Bruyette & Woods in a note.
James Antos, a senior analyst at Mizuho Securities, said the bank's return on equity (ROE), a measure of the bank's profitability based on shareholders' capital, reached 12.36 per cent after adding back one-off sales, provisions made for money-laundering charges and losses from the adverse movements in the fair value of its debt.
But the bank's accounting ROE was just 5.92 per cent, well short of its target of 12 to 15 per cent by 2014, Antos said.
Cost-income ratio deteriorated to 70.6 per cent from 49.5 per cent in the same period last year.