HSBC Q3 profits fall 86%

The figure includes two large exceptional items- a $1.7 billion write down from disposal of HSBC’s Brazilian business and a $1.4 billion change in the bank’s credit spread. The bank also suffered a $658 million headwind from the strengthening dollar.

Stripping these items out, adjusted profit rose 7% to $5.6 billion, higher than analysts had expected, sparking a 4% rise in shares.

Stuart Gulliver, Group Chief Executive, said: "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. Reported profits included the impact of the disposal of our operations in Brazil, changes in the fair value of our own debt, and the costs of implementing our cost-reduction programmes.

"Our global universal banking model generated higher adjusted revenue than for the same period last year, and our costreduction programmes continued to reduce our operating expenses. This produced adjusted positive jaws of 5.6% for the third quarter and 1.5% for the first nine months of the year."

Laith Khalaf, Senior Analyst at Hargreaves Lansdown, commented: "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.

"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."