HSBC beats estimates, reports 36% year-on-year fall in pre-tax profit for the third quarter - CNBC

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Pedestrians wearing protective masks walk past a logo displayed at a HSBC bank branch in the central district of Hong Kong.

Roy Liu| Bloomberg | Getty Images

SINGAPORE — HSBC, Europe's largest bank by assets, on Tuesday reported a 36% year-on-year fall in third-quarter pre-tax profit in the third quarter as it attempts to recover from the economic shock of the coronavirus pandemic.

The bank's reported profit before tax was $3.07 billion in the July-to-September quarter, better than the $2.07 billion that analysts had expected, according to estimates compiled by the bank. In the third quarter last year, the bank recorded $4.84 billion in profits before tax.

Reported revenue was $11.93 billion for the quarter, 11% lower than a year ago.

HSBC's Chief Executive Noel Quinn said in a statement that the results were "promising" in light of the "continuing impacts of Covid-19 on the global economy."

Here are the other highlights of the bank's financial report card:

An additional $785 million was set aside in the third-quarter for potential loan losses, bringing provisions for the first nine months of 2020 to $7.64 billion. HSBC said total provisions for the year could be at the lower end of its $8 billion to $13 billion estimate;
Net interest margin, a measure of loan profitability, was 1.2% in the quarter — down 13 basis points from the previous quarter and 36 basis points lower than a year ago;
Operating expenses declined by 1% compared with a year ago;
Common equity tier 1 ratio was 15.6% compared with 15% in the previous quarter.

HSBC shares in Hong Kong jumped by more than 4% after the earnings release. The bank's Hong Kong-listed shares have plunged by 47% this year as of Friday, while its London-listed shares dived 45.7% over the same period, data by Refinitiv showed.

Before the earnings release, Jackson Wong, asset management director at Amber Hill Capital, said HSBC's prospects could start to improve if Covid-19 cases around the world don't get much worse.

"I think the worst probably could be over," he told CNBC's "Squawk Box Asia" on Tuesday.

"We haven't seen a very bright future at this point so it could be (starting) to turn better, but it's not very robust at this point yet," he added.

HSBC's financial results follow that of other European banks, many of which have beaten analysts' expectations.

Last week, fellow British lender Barclays reported third-quarter net profit that was more than double what analysts had forecast as the bank set aside less money for potential bad loans.

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