HSBC shares drop after third quarter profit release

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Despite improved earnings from interest-bearing business, the London-listed stock opened down around 5%. A worsening credit environment dragged on the stock, taking it down close to an area of key support.

 

 Jeremy Naylor | Writer, London | Publication date: Tuesday 25 October 2022

HSBC earnings

The first of London's big banks has reported this morning, and it's been a bit of a disappointment to the markets because the numbers fell year-on-year (YoY). In fact, the third quarter (Q3) was better than had been expected.

Let's take a look at the figures as they came through today. This is HSBC on its third quarter numbers: pretax profit of $3.15 billion, down 42% from $5.4 billion this last year, but well above the $2.5 bn analyst estimates compiled by the bank.

Now, the drop is because of the rising credit loss provision and other impairments, but its net interest income surged as banks benefit from rising interest rates. Now, the result included an impairment of $2.4 billion following the reclassification of the bank's retail operations in France to be held for sale.

Stock heavily down

So the net effect of that was we saw the stock down heavily on the session today. And in fact, it's the biggest decline we've seen in this stock since the 26th of April this year and we are very close to closing in on this line of support down here at four 42.4 - 451 is where we are at the moment.

It certainly seems like much of the downside has now been seen by the bank. It was down three and a half percent in the Hong Kong markets, is currently down 4.8% here in London. That line of support at 442 marks a point at which it would then dip down into levels not seen since December last year.

So the markets looking very weak for HSBC despite the fact it's made a lot of income coming through from this rise in interest rates. Clearly the rising credit loss provisions are a concern and this is something that's going to be underscoring banks' performance in the next quarter as well as consumers finding it harder and harder to keep above the waterline in terms of household expenditure.

So HSBC on the way down today, marking the first of the big British banks to report earnings this week.