HSBC Q3 Pre-Tax Earnings Rise Y/Y as ECL Charges Decline, Stock Up

Core Viewpoint - HSBC Holdings reported a third-quarter 2024 pre-tax profit of $8.5 billion, reflecting a 9.9% increase year-over-year, despite losses from legacy securities and treasury repositioning [1][2] Financial Performance - Total revenues reached $17 billion, up 5.2% year-over-year, primarily driven by an increase in other operating income [3] - Operating expenses rose 2.2% year-over-year to $8.1 billion, influenced by higher technology costs and inflation, although mitigated by cost discipline and disposals in Canada and France [3] - Expected credit losses (ECL) were $986 million, down 7.9% year-over-year, contributing positively to the financial results [3] Capital and Ratios - The common equity tier 1 (CET1) ratio as of September 30, 2024, was 15.2%, an increase from 14.9% a year earlier, while the leverage ratio remained stable at 5.7% [4] Business Segment Performance - Wealth and Personal Banking reported a pre-tax profit of $3.23 billion, up 16.2% year-over-year, driven by increased net fee income [5] - Commercial Banking's pre-tax profit was $3 billion, up 5.4% year-over-year, supported by lower ECL charges [5] - Global Banking and Markets saw a pre-tax profit of $1.79 billion, a significant increase of 39.7% year-over-year, while the Corporate Centre reported a decline of 47.7% to $400 million [6] Capital Deployment - The board approved a third interim dividend of 10 cents per share and plans to initiate a share buyback of up to $3 billion, expected to be completed within four months [7] Outlook - For 2024, management anticipates banking net interest income (NII) of $43 billion and targets a 5% growth in operating expenses [8] - ECL charges are expected to be between 30 and 40 basis points of average gross loans, with a return on average tangible equity projected in the mid-teens for 2024 and 2025 [8][9] Strategic Initiatives - The company aims to manage the CET1 ratio within a medium-term target of 14-14.5% and expects a dividend payout ratio of 50% for 2024 [9] - HSBC's strong capital position and digital capabilities, along with efforts to improve operating efficiency, are expected to support its financials despite challenges in revenue growth due to the macroeconomic environment [10]