HSBC’s net profit slides 54% in the fiscal third quarter
- HSBC’s net profit slides 54% in the fiscal third quarter.
- The investment bank reports an 11% decline in revenue.
- HSBC forecasts a broader reduction in 2022 annual cost base.
In an announcement on Tuesday, HSBC Holdings plc (LON: HSBA) said that its net profit posted a decline in the fiscal third quarter. The company attributed the decline to its revenue that was under pressure in Q3 due to the Coronavirus pandemic that resulted in lower interest rates.
Shares of the company were reported about 4% up in premarket trading on Tuesday and jumped another 2% on market open. Including the price action, HSBC is now exchanging hands at 342 pence per share versus a year to date low of 283 pence per share in late September. In comparison, HSBC had started the year at a per-share price of 595 pence per share.
HSBC reports an 11% decline in revenue
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HSBC reported £1.04 billion of net profit in the third quarter that represents a 54% annualised decline from £2.28 billion. FactSet Consensus for net profit in Q3 also stood at a higher £1.71 billion. In an internal report last week, HSBC revealed to have frozen £1.5 billion of customers’ cash in dormant accounts.
In terms of revenue, the investment bank saw an 11% year over year decline to £9.15 billion. HSBC expects the ongoing COVID-19 crisis to keep global interest rates lower in the upcoming months that it says could weigh on its net interest income in Q4.
The British multinational also highlighted a significant decline in bad loans in the recent quarter. For Q4, it now projects up to £9.97 billion of credit losses. In the fiscal first half, HSBC added, impairment costs resulted in a significant hit to financial performance. In its report published in early August, HSBC had registered a 77% decline in H1 net profit.
HSBC forecasts a broader reduction in 2022 annual cost base
The London-headquartered bank also said on Tuesday that it is expecting a broader reduction in its annual cost base in 2022 than £23.78 billion that it originally targeted. HSBC resorted to suspending its dividend earlier this year to cushion the economic blow from the COVID-19 crisis. It said on Tuesday that a regulatory consultation and economic conditions in the first few months of 2021 will determine if a dividend for 2020 will be reinstated.
HSBC performed slightly downbeat in the stock market last year with an annual decline of about 8%. At the time of writing, the world’s sixth-largest bank has a market cap of £69.49 billion.