HSBC Holdings plc (HSBC) shares rose to the top of the London leaderboard Monday after the region's biggest bank posted stronger-than-expected third quarter profits as it reigned in costs and drove stronger profits in Asia as part of the broader "pivot" strategy of new CEO John Flint.
HSBC said profits for the three months ending in September came in at $5.9 billion, a figure that topped the consensus forecast of $5.6 billion and rose 28% from the same period last year. Group revenues were up 6.3% to $13.8 billion, the bank said, and costs fell 2.4% across the board, allowing for the stronger-than-expected bottom line. Asia profits, which account for around 75% of the bank's total, rose 10.7% to $4.5 billion.
"These are encouraging results that demonstrate the revenue potential of HSBC. We are doing what we said we would - delivering growth from areas of strength, and investing in the business while keeping a strong grip on costs," Flint said in a statement. "We remain committed to growing profits, generating value for shareholders and improving the service we offer our customers around the world."
"We remain the cautiously optimistic on global growth," Flint added. "Geopolitical concerns have softened customer confidence slightly since the half year, and they're clearly creating some volatility in capital market. However, we're not yet seeing that impact to core revenue streams in a meaningful way."
HSBC shares were marked nearly 4% higher in the opening 30 minutes of trading Monday and changing hands at £6.29 each on the London Stock Exchange, topping gainers on the FTSE 100 and trimming its year-to-date decline to around 18%.
Earlier this month the bank said it will pay more than $750 million to the U.S. Department of Justice to settle a long-running dispute with authorities that it mis-sold mortgage bonds in the run up to the global financial crisis. HSBC said the definitive settlement, which includes a civil penalty of $765 million, will apply to its HSBC North America division but will not include an admission of liability or wrongdoing.
The settlement puts a major U.S. litigation risk behind it as the bank moves to accelerate earnings as part of its "Asia pivot" strategy under Flint, although investors are still questioning the costs associated with the bank's planned expansion. HSBC also said it will hold its dividend in place at 10 cents a share as it pursue's its current strategy of returning to growth and creating value.
However, both the bank's cost base, which has plagued other financial institutions attempting to expand in China and Southeast Asia, as well as the escalating trade tensions between the U.S. and China, have some investors questioning its ability to enhance shareholder returns in the second half of the year.