The bank reported the 86% decline in Q3 profits to $843m (£673m, €756m) but this was said to include two exceptional items – the disposal of its Brazilian business, leading to a $1.7bn write-down, and a $1.4bn change in the bank’s credit spread.
It also suffered a $658m headwind from the strengthening US dollar.
These items aside, HSBC’s adjusted profits rose by 7% to $5.6bn, adjusted operating expenses fell by 3.5% while adjusted revenues were up 2.1%.
It said it was 59% through its share buyback programme, which was expected to complete in late 2016 or early 2017.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “HSBC’s results show you can’t make an omelette without breaking eggs, and the bank’s efforts to refocus on its Asian roots have weighed down reported profits this quarter, thanks to a large loss resulting from disposal of its Brazilian operations.
“However the underlying business numbers from HSBC were pretty positive, with costs and revenues both heading in the right direction, and the bank’s capital position improving significantly, though this was largely down to a change in regulatory requirements.”
Uncertain regulatory environment
HSBC’s capital position improved, with its Tier 1 capital ratio rising from 12.1% at the end of June to 13.9%, though this was understood to be down to a change in capital requirements for Chinese bank BoCom, one of HSBC’s strategic investments.
This stronger position would allow the bank to better support its dividend policy, invest in the business and contemplate further share buybacks, as appropriate.
HSBC said it also provided “significant capacity to manage the continuing uncertain regulatory environment”.
In the results statement, Stuart Gulliver, group chief executive, said: “Our third quarter performance reflected the strength of our network and the deepening impact of our strategic actions. Reported profits were down, but adjusted profits were higher than last year’s third quarter in all four global businesses and four out of five regions.”
Khalaf added: “Like the other UK banks, low interest rates are depressing returns on HSBC’s lending activities, and there has been a jump in provisions for bad loans, though these remain at relatively low levels.
“The market seems to be gaining confidence that HSBC is going to be able to maintain its dividend, and the bank now trades on a forward yield just above 6%, compared to almost 8% earlier in the year. That’s still pretty high, but has been pared back by a resurgent share price, which has risen by around a third over the last three months.”
Meanwhile Graham Spooner, investment research analyst at The Share Centre said as HSBC profits were still above analyst consensus expectations and were higher than the same period last year, income investors might consider HSBC over other names in the sector.