HSBC shares jump 5% after Europe's biggest bank reports slimmer credit losses and signals it could pay a dividend this year

Pedestrians walk past a branch of the British multinational banking and financial services holding company, The Hongkong and Shanghai Banking Corporation, or HSBC, in New York City.

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  • HSBC reported an 11% drop in revenue and a 36% slide in pre-tax profits for the third quarter on Thursday.
  • Europe’s biggest bank also lowered its expected credit losses by almost $100 million to below $800 million, and will consider paying a “conservative dividend” to shareholders this year.
  • “I’m pleased with the significantly lower credit losses in the quarter, and we are moving at pace to adapt our business model to a protracted low interest rate environment,” CEO Noel Quinn said in the earnings release.
  • HSBC shares rose as much as 5%.
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HSBC’s posted lower revenue and profits in the third quarter as the coronavirus pandemic weighed on its operations. However, Europe’s biggest bank also disclosed lower credit losses than expected in its earnings on Monday, and raised the prospect of a “conservative dividend” for shareholders this year, sending its shares up as much as 5% in London.

The lender’s revenue slumped 11% to $11.9 billion as lower interest rates weighed on deposits, fueling a 36% plunge in pre-tax profits to $3.1 billion. As a result, its earnings per share more than halved to 7 cents.

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More positively, HSBC reduced its expected credit losses and other credit impairment charges in the period by almost $100 million to $785 million, bringing the total so far this year to $7.6 billion.

Here are the key numbers, compared to the third quarter of 2019:

Revenue: $11.9 billion versus $13.4 billion

Profit before tax: $3.1 billion versus $4.8 billion

Earnings per share: 7 cents versus 15 cents

The bank also grew the total value of its customer accounts by about $36 billion to $1.57 trillion. Moreover, it increased its common equity tier 1 capital ratio – a key measure of the bank’s financial strength from a regulatory standpoint – from 14.7% to 15.6%.

“These were promising results against a backdrop of the continuing impacts of Covid-19 on the global economy,” CEO Noel Quinn said in the earnings release.

“I’m pleased with the significantly lower credit losses in the quarter, and we are moving at pace to adapt our business model to a protracted low interest rate environment.”

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HSBC continued its sweeping transformation program last quarter. For example, it reduced the volume of risk-weighted assets in its global banking and markets business, and invested in technology to improve its efficiency and customer experience.

However, the lender also underscored heightened geopolitical risks, pointing to trade and other tensions between the US and China and the lingering uncertainty over a Brexit deal.

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