HONG KONG/LONDON, Oct 27 : HSBC's third-quarter profit surged 32 per cent as it benefited from favourable interest rates while avoiding hefty credit losses, but a marked slowdown at its wealth business underscored the challenge of sustaining its recent strong performance.
The bank's Hong Kong-listed shares dropped 5 per cent after the results. They remain up 11 per cent for the year to date.
Pretax profit for Europe's largest bank came in at $9.6 billion for the July-September quarter, in line with estimates compiled by HSBC.
It also launched a share buyback of up to $1 billion, the same amount as the previous quarter.
On the plus side, HSBC benefited from the absence of legal provisions booked in the same quarter a year earlier. It also said expected credit losses tumbled 17 per cent to $800 million, thanks to a reduction in charges linked to Hong Kong's real estate sector as well as its UK and Mexican wealth businesses.
But revenue for its wealth division was flat at $2.7 billion. That compares with 15 per cent and 23 per cent year-on-year revenue growth in the first two quarters.
HSBC said it is on track to meet its core profitability targets through to 2028, in a further sign of how the region's lenders have sustained robust profits in recent years despite the impact of the Iran war on inflation and interest rates.
The strong performance has increased calls from activist groups in HSBC's home market of Britain for tax hikes on banks in Finance Minister John Healey's first budget, due on Wednesday.
Bank bosses have lobbied hard to avoid such an increase in sector levies, arguing it would curb lending and make Britain less competitive.
The bank clarified regulatory capital reforms known as Basel 3.1 would benefit its core capital ratio by up to half a percentage point, where previously the bank had described a 'modest benefit' from the reforms.
HSBC announced an interim dividend of $0.1 per share, the same as the previous quarter.