HSBC Registers 3% YoY Dip in Revenue for 3Q 2022

HSBC Holdings plc has released today the financial results for the third quarter of 2022 (Q3 2022).

Financial performance (3Q22 vs. 3Q21)

Reported profit after tax decreased $1.7bn to $2.6bn and reported profit before tax fell $2.3bn to $3.1bn. Our 3Q22 results included an impairment of $2.4bn following the reclassification of the bank's retail banking operations in France to held for sale, as well as a net charge for expected credit losses and other credit impairment charges ('ECL'), compared with a net release in 3Q21. There was continued strong growth in net interest income. Adjusted profit before tax increased $1.0bn to $6.5bn.

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Reported revenue decreased 3% to $11.6bn, reflecting an impairment on the planned disposal of our retail banking operations in France, as well as adverse foreign currency translation impacts of $1.0bn. However, net interest income increased in all of the bank's global businesses due to interest rate rises. Adjusted revenue rose 28% to $14.3bn.

Net interest margin ('NIM') of 1.57% increased 38 basis points ('bps') compared with 3Q21, and by 22bps from 2Q22.

Reported ECL were $1.1bn, including allowances to reflect increased economic uncertainty, inflation, rising interest rates and the ongoing developments in mainland China's commercial real estate sector. This compared with a $0.7bn net release in 3Q21.

Reported operating expenses were unchanged from 3Q21. The benefits of HSBC's cost-saving initiatives and favourable foreign currency translation impacts of $0.7bn were offset by an increase of $0.3bn in restructuring and other related costs, higher investments in technology, an increase in the performance-related pay accrual due to the expected phasing of our profits for the year, and the impacts of rising inflation. Adjusted operating expenses rose 5% due to a higher performance-related pay accrual and increased investment spend, mainly in technology. Compared with 2Q22, adjusted operating expenses were broadly stable.

Customer lending balances fell $61bn in the quarter on a reported basis. On an adjusted basis, lending balances fell $18bn, reflecting a $23bn reclassification of loans relating to the planned disposal in France to assets held for sale, partly mitigated by growth in mortgage balances of $2bn in the UK and $1bn in Hong Kong.

Common equity tier 1 ('CET1') capital ratio of 13.4% fell 0.2 percentage points from 2Q22, including a 0.3 percentage point impact from the reclassification of our French retail banking operations to held for sale and a 0.1 percentage point impact from further losses in equity from financial instruments as yield curves steepened.

Noel Quinn, Group Chief Executive, said: "We maintained our strong momentum in the third quarter and delivered a good set of results. Our strategy produced good organic growth in all three global businesses, and net interest income increased on the back of rising interest rates. We retained a tight grip on costs, despite inflationary pressures, and remain on track to achieve our cost targets for 2022 and 2023. We are focused on executing our plans and delivering our returns target of at least 12% from 2023 onwards and, as a result, higher distributions to our shareholders."