HSBC profit slides amid falling interest rates, weak commercial property market

HSBC Holdings, the largest banking group in Europe and Hong Kong by assets, reported a 25 per cent decline in third-quarter profits on Tuesday as a result of lower interest rates and provisions made for commercial property and lawsuits related to the Bernard Madoff fraud case.

Net profit for the July to September quarter stood at US$4.58 billion, or 28 US cents per share, compared with US$6.13 billion a year earlier, the bank said. The result misses the US$5.38 billion consensus of 18 analysts surveyed by the lender in mid-October, before the bank said on Monday that it would make a one-off US$1.1 billion provision related to the Madoff lawsuit.

Pre-tax profit dropped 14 per cent from a year earlier to US$7.3 billion, lower than analyst estimates of US$7.66 billion.

During the quarter, HSBC took US$1 billion of expected credit losses, similar to a year earlier. The exposure includes US$200 million in charges related to the commercial real estate market in Hong Kong. The rest is from the Middle East and the UK.

The bank, which is celebrating the 160th anniversary of its establishment in Hong Kong this year, will pay a quarterly dividend of 10 US cents per share.

“We are becoming a simple, more agile, focused bank, built on our core strengths,” said CEO Georges Elhedery in a stock exchange filing. “The intent with which we are executing our strategy is reflected in our performance this quarter, despite taking legal provisions related to historical matters.

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