HSBC, Europe's largest lender, said its third-quarter profit surged 76 per cent after it released provisions that were earmarked for bad loans that did not materialise.
Pretax profit for the quarter to the end of September rose to $5.4 billion, from $3.1bn in the year-earlier period, the bank said in a statement on Monday.
The results beat the $3.78bn average estimate of 14 analysts compiled by HSBC.
HSBC released $700 million in cash it had put aside as provisions for bad loans during the Covid-19 pandemic, compared with an $800 million charge it took a year ago.
This was a reflection of "continued stability in economic conditions and better-than-expected levels of credit performance", the bank said.
All of the bank's regions were profitable during the third quarter, with Asia, the lender's most important market, contributing $3.3bn to the group's reported profit before tax.
HSBC UK's reported profit before tax increased by $1bn to $1.5bn.
"We had a good third-quarter performance, with strong growth in profits supported by additional credit provision releases. Our strategy remains on track, with good delivery in all areas. This was reflected in more consistent top-line growth, robust lending pipelines across our businesses and rising trade and mortgage balances," said Noel Quinn, group chief executive.
"While we retain a cautious outlook on the external risk environment, we believe that the lows of recent quarters are behind us. This confidence, together with our strong capital position, enables us to announce a share buyback of up to $2bn, which we expect to commence shortly."
In an interview with Bloomberg Television on Monday, chief financial officer Ewen Stevenson said HSBC expects no material fallout from indebted property developer Evergrande.
Reported revenue edged up 1 per cent to $12bn and the revenue outlook is becoming more positive, with fee growth across the bank's businesses and a stabilisation of net interest income expected to begin increasing in the coming quarters as lending picks up and interest rates begin to rise.
The bank said it continued to "demonstrate strong cost control over the course of the year".
In light of rising inflation globally, continued investment and the impact and timing of recently announced acquisitions and disposals, HSBC now expects adjusted costs of about $32bn for 2021 and 2022, excluding the estimated UK bank levy charge of $300m.
"With an improved revenue outlook and the prospect of rising policy rates, we remain committed to achieving a RoTE [return on equity] of greater than or equal to 10 per cent over the medium term," it said.
HSBC said it is "well placed to fund growth" and step up capital returns. It intends to normalise its Common Equity Tier 1 ratio position to within its operating range target of 14 per cent to 14.5 per cent by the end of 2022.
The ratio is a measure of bank solvency that gauges a lender's capital strength.
"We intend to achieve this through a combination of growth and capital returns, as well as from an expected $20bn to $35bn uplift in RWAs [risk weighted assets] in 2022 due to regulatory developments," it said.