London-based bank HSBC announced that its third-quarter pre-tax profit was $5.4 billion, smashing the expectations of analysts. HSBS, the second-largest bank in Europe, said that it would begin a $2 billion buyback in shares soon.
HSBC’s pre-tax profit jumped by 75.8 percent for the quarter. Analysts had predicted a 22.8 percent increase.
The bank announced that it had released about $700 million in cash that was put aside to counter loan loss increases expected as a result of the pandemic. The reserve aided in the positive results, and all of the bank’s regions saw profitability during the third quarter.
In Hong Kong, HSBC shares closed 0.43 percent higher for Monday trading.
CEO of HSBC Noel Quinn said in the bank’s earnings release, “While we retain a cautious outlook on the external risk environment, we believe that the lows of recent quarters are behind us.”
The bank reported $12 billion in revenue for the third quarter, 0.7 percent more than last year’s quarter from the same period. Its net interest margin was 1.19 percent for the third quarter compared to 1.2 percent in the second quarter. Net interest margin is considered a metric of lending profitability.
The common equity tier 1 ratio for the bank was 15.9 percent for the third quarter, a tad higher than the second quarter’s 15.6 percent. The ratio compares the bank’s capital to its assets.
Basic earnings per share for HSBC was 18 cents, one cent more than the second quarter’s 17 cents and 11 cents more than last year’s third quarter.
HSBC CFO Ewen Stevenson said the bank’s capital standing is “very strong,” adding that it will strive to bring down its capital ratio to between 14 percent and 14.5 percent by the end of 2022.
Stevenson said, “We don’t want to sit on excess capital if we have it and hence the $2 billion buyback.