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Investing.com -- Shares of HSBC Holdings Plc (LON:HSBA) rose more than 2% on Tuesday after the London-based lender reported third-quarter profit and income ahead of forecasts, driven by stronger net interest income and a surge in wealth management revenues.
HSBC’s adjusted profit before tax was 9% above consensus estimates. Total income exceeded expectations by 5%, with gains split evenly between banking net interest income and non-interest income.
Banking net interest income reached $11 billion in the quarter, about 3% higher than Jefferies’ forecast, as the group’s net interest margin improved to 1.57%, up 1 basis point from the previous quarter and 11 basis points higher year over year.
“Banking NII of $11bn was 4% (or $447m) ahead of consensus,” BofA Securities said in a note, adding that the result reflected “benefits from (1) day count; (2) growth in both loans and deposits; (3) hedge roll; partially offset by (4) rate cuts.”
Management raised 2025 guidance for banking net interest income to “$43bn or better,” compared with previous guidance of about $42bn.
Return on tangible equity excluding notable items was about 18% year to date, while reported return stood at 14%, Jefferies said.
Wealth revenue climbed 29% year over year, led by a 46% increase in insurance income and a 39% rise in investment distribution.
Jefferies described Wealth as a “standout,” noting that private banking and asset management also recorded gains of 8% and 6%, respectively.
BofA said the division was “the key driver of the beat,” contributing about $374 million above expectations.
Adjusted total income was $17.9 billion, up 3% from a year earlier, while operating expenses increased 3% to $8.4 billion.
The quarter included $1.4 billion in legal provisions, of which $1.1 billion related to the Madoff securities fraud case. BofA noted total one-off items of about $1.8 billion, primarily linked to litigation.
“The bulk of the notable items this quarter relates to legal provisions (c.$1.4bn in total) – within this c.$1.1bn relates to Madoff securities fraud” the brokerage said.
Credit impairment charges totaled $1 billion, consistent with guidance of roughly 40 basis points of loans, and included a $200 million charge on Hong Kong commercial real estate.
The brokerage said about $1 billion of sub-standard loans in that portfolio migrated to credit-impaired status during the quarter.
HSBC’s Common Equity Tier 1 ratio was 14.5%, in line with consensus, while risk-weighted assets fell 1% from the previous quarter to $879 billion. Tangible net asset value per share rose 2% year over year to 922 cents.
BofA Securities reiterated a “neutral” rating on the stock and raised its price objective to 1,160 pence from 1,120 pence, citing improved profitability.
Jefferies maintained a “hold” rating with a 1,120 pence target, representing a 12% upside from the prior close.
HSBC declared a $0.10 per-share ordinary dividend for the quarter and reaffirmed guidance for 2025 return on tangible equity in the “mid-teens or better” range.