ii view: HSBC admits unacceptable performance

HSBC is to further restructure operations after woeful numbers. Shareholder patience is being tested. 

Third-quarter results to 30 September 2019

• Reported revenue down 3% to $13.4 billion
• Profit attributable to ordinary shareholders down 24% to $3 billion
• Quarterly dividend unchanged at 10 cents per share

Chief executive Noel Quinn said:

"Parts of our business, especially Asia, held up well in a challenging environment in the third quarter. However, in some parts, performance was not acceptable, principally business activities within continental Europe, the non-ring-fenced bank in the UK, and the US. Our previous plans are no longer sufficient to improve performance for these businesses, given the softer outlook for revenue growth. We are therefore accelerating plans to remodel them and move capital into higher growth and return opportunities."

ii round-up:

Founded in 1865 in Hong Kong and now headquartered in London, HSBC (LSE:HSBA) serves more than 39 million customers worldwide. 

It employs around 235,000 staff across 3,800 offices in over 60 countries.

Services include both retail and commercial banking, global banking and markets, and wealth management. 

For a round-up of these third-quarter results, please click here.

ii view:

Having emerged from the financial crisis in better shape than many of its competitors, HSBC now looks to be undertaking a degree of catch-up. While its core Asian operations continue to progress, businesses elsewhere, which rivals may have either sold or already restructured more severely, are now dragging even harder on performance as underlining economic conditions become ever more challenging. 

For investors, the recent surprise change of the chief executive, while not helpful in terms of strategic continuity, does look to underline the board's determination and impatience to grow the bank. Today' news regarding likely additional business restructuring costs only adds to a list of prior concerns including trade wars, geopolitical tensions and economic slowdown in many parts of the world. For now, at least, a prospective dividend yield of over 5%, offers some compensation for those investors with sufficient patience. 

Positives: 

• Trading in Asia has held up well
• An increased level of restructuring and cost cutting
• New chief executive may galvanise the bank and provide renewed clarity of purpose

Negatives:

• Non-performing businesses 
• Exposure to economies suffering geopolitical tensions
• No longer expects to meet a previous target for returns to shareholders

The average rating of stock market analysts:

Sell