Cleaner HSBC balance sheet leaves doubts
While investors are positive on bank's third-quarter profit that misses forecasts but lacks huge provisions, some analysts fear cloud remains
HSBC, Europe's largest bank, failed to match analysts' third-quarter profit forecasts yesterday but a cleaner balance sheet, without massive provisions, still impressed the market.
Analysts said cost savings, shrinking bad debts and capital strength were better than expected after HSBC reported a third-quarter pre-tax profit of US$4.5 billion, up 30 per cent year on year but short of the market's US$5.4 billion consensus forecast. It fell 19.6 per cent from the previous quarter.
Global banking and markets, the investment banking arm often regarded as the group's growth engine, performed better than its industry rivals, analysts said, although results were down on the previous quarter, with those from commercial banking.
They said prospects would be dependent on revenue growth and whether further provisions would be needed for fines and legal costs, after the bank disclosed that it was among those being investigated by Britain's Financial Conduct Authority in relation to trading on the foreign exchange market.
"Net loan growth remains weak, in part reflecting a residual drag from legacy run-off and strategic divestments," Investec analyst Ian Gordon wrote in a research report.
It reaffirmed a "buy" rating and a target price of 745 pence (HK$92), reflecting the bank's strong performance in Hong Kong and reduction in impairment provisions.