Mena a bright spot for HSBC profit in the third quarter

HSBC's regional pretax profit in the three months ended September 30 rose 28 per cent to US$487 million compared to $379m in the same period a year earlier.. Ravindranath K / The National

HSBC, Europe’s biggest bank by market value, revealed in its third-quarter earnings that the Middle East and North Africa was one of its best performing regions amid an economic boom in the Arabian Gulf that has driven up demand for loans. Other services such as securities underwriting and wealth management also benefited.

The bank’s regional pretax profit in the three months ended September 30 rose 28 per cent to US$487 million compared to $379m in the same period a year earlier. Income before taxes from retail banking and wealth management in the region outperformed the bank’s other lines of business, jumping 54 per cent to $91m from $59m.

However, the bulk of the pretax profit, about $246m, came from its global banking and markets division, which includes investment banking services such as arranging initial public offerings for companies and equities trading.

Banks in the UAE have been the biggest beneficiaries of an economic resurgence that propelled GDP growth to more than 4 per cent last year as corporations and individuals took bank loans for everything from refinancing old debt to buying new homes and cars. But because interest rates are low, this has meant banks – of which there are more than 50 servicing a population of 9 million in the UAE – have had to compete for clients and search for other ways to make money apart the interest they make on loans in fields that include trade finance, asset management and securities brokerage.

Elsewhere for HSBC, things have not been as rewarding. The bank reported overall lower than estimated third-quarter profits as it set aside more than $1 billion for customer compensation and an investigation into rigging currency markets.

Pretax profit rose to $4.61bn from $4.53bn in the year-earlier period, the London-based lender said yesterday. That compares with the $5.47bn average estimate of seven analysts compiled by Bloomberg. The bank made a $378m provision towards a settlement of the currency benchmark-rigging investigation and set aside an additional $701m to redress customers in Britain.

The chief executive, Stuart Gulliver, has exited at least 68 businesses since taking over in 2011 as he shifts investment to the bank’s most profitable markets amid increased regulation and compliance costs in Europe and the United States. The lender, which gets most of its revenue from Asia, has provisioned $1.97bn this year for customer compensation, litigation and other charges, overshadowing gains in profit. Its North America profit fell 85 per cent this year to $58m because of this.

HSBC’s shares were down 1.1 per cent to 632.5 pence in late morning London trading after dropping as much as 3 per cent earlier. The stock has fallen 4.6 per cent this year, giving it a market value of about £121bn (Dh711.21bn).

HSBC’s best-performing region was Europe, which swung to a pretax profit of $493m from a $45m loss in the same period last year. The bank said loan impairment costs decreased by $1bn in the region, mainly driven by improvements to UK commercial banking and an improving economy.

In Asia, profit fell about 3 per cent to $3.5bn.

* with agencies

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