HSBC’s net profit fell by 54% in the third quarter of the financial year.
The investment bank reports an 11% decline in revenues.
HSBC is forecasting a broader reduction in its annual cost base in 2022.
In an announcement on Tuesday, HSBC Holdings plc (LON: HSBA) said that its net profit had declined in the third quarter of the financial year. The company attributed the decline to its revenues, which came under pressure in the third quarter due to the coronavirus pandemic that led to lower interest rates.
The company’s shares gained approximately 4% in pre-trade trading on Tuesday and rose a further 2% when the market opened. Including the price action, HSBC is now trading at 342 pence per share, up from the previous year’s low of 283 pence per share at the end of September. This compares with HSBC starting the year at 595 pence per share.
HSBC reports an 11% fall in revenue.
HSBC reported a net profit of £1.04 billion in the third quarter, a 54% decline from £2.28 billion on an annualised basis. The FactSet Consensus for third quarter net profit was also higher at £1.71 billion. In an internal report last week, HSBC revealed that the company had frozen £1.5 billion of client funds in dormant accounts.
In terms of revenue, the investment bank reported an 11% year-on-year decline to £9.15 billion. HSBC expects the ongoing COVID 19 crisis to keep global interest rates low in the coming months, which HSBC believes could impact net interest income in the fourth quarter.
The British multinational also pointed to a significant reduction in non-performing loans in the last quarter. For the fourth quarter, it now expects credit losses of up to £9.97 billion. In the first half of the financial period, HSBC added, the impairment charges had a significant impact on financial performance. In its report published in early August, HSBC had reported a 77% decline in net profit for the first half of the financial period.
HSBC forecasts a broader reduction in the annual cost base in 2022
The London-based bank also said on Tuesday that it expects to reduce its annual cost base in 2022 by more than the original £23.78 billion target. HSBC took action earlier this year to suspend its dividend to cushion the economic blow of the COVID 19 crisis. It said on Tuesday that a regulatory consultation and economic conditions in the early months of 2021 will decide whether to reintroduce a dividend for 2020.
HSBC’s stock market performance was slightly negative last year with an annual decline of around 8%. At the time of writing, the world’s sixth largest bank has a market capitalisation of £69.49 billion.