HSBC reported a 32% rise in third-quarter pre-tax profit to $9.6bn, but its shares fell after revenue missed expectations, with weaker performance in its wealth management business dragging down results.

Revenue for the three months to September increased by 5% to $18.6bn, slightly below analysts’ forecasts of $18.9bn, while pre-tax profit also fell short of the expected $9.7bn. Net interest income rose 6% to $9.3bn, supported by deposit growth and the reinvestment of the bank’s structural hedge at higher yields. Profit after tax increased by 38% to $7.6bn.

The improvement in profitability partly reflected the non-recurrence of $1.4bn in legal provisions booked a year earlier. Lower expected credit losses and stronger banking income also supported the results. Operating expenses fell 12% to $8.8bn, although underlying costs rose as the bank invested in technology and continued to face inflationary pressures.

The wealth business was a particular disappointment, with revenue falling 3% after growth of 15% and 23% in the first and second quarters respectively. Pre-tax profit in the division dropped 14% to $1.1bn, raising questions over the pace of growth in a business central to HSBC’s strategy of expanding its affluent customer base, particularly in Asia.

Georges Elhedery, group CEO, said: “Our performance shows that in a more complex world clients continue to turn to us to navigate uncertainty and seize new opportunities. It also reflects consistent execution of our strategic priorities with pace, precision and discipline. As we simplify HSBC, we are creating greater capacity to invest, grow and deliver strong returns for our shareholders.”

HSBC completed a $1bn share buyback on 28 September and announced plans for a further buyback of up to $1bn, which it expects to complete by the release of its full-year results. The board also approved a third interim dividend of $0.10 per share.

For the first nine months of the year, pre-tax profit rose 26% to $29.2bn, while revenue increased 9% to $56.4bn. The bank reported an annualised return on average tangible equity of 18% for the period, or 18.8% excluding notable items.

The bank maintained its target of a return on average tangible equity of at least 17% in each of 2026, 2027 and 2028, excluding notable items, and reiterated its ambition to deliver year-on-year revenue growth through 2028, reaching 5% growth in that year.

Shares of the FTSE 100 firm, the UK's largest bank, fell 7% to £12.70 in morning trading.

Analysts focused on the wealth business dragging down results but noted shares had risen by 36% over the last year, as compared to a gain of 11.5% for the wider FTSE100, and by 100% over the last two years.

Russ Mould, investment director at AJ Bell, said: “HSBC’s wealth business was to blame for the bank missing revenue estimates.

"Investors already know that higher interest rates are benefiting the banks so HSBC’s big increase in third-quarter profits was not enough to win them over – particularly as revenue fell short of expectations.

“Investors already know that higher interest rates are benefiting the banks so HSBC’s big increase in third-quarter profits was not enough to win them over – particularly as revenue fell short of expectations.

“HSBC is under pressure to bring costs down and while there is clear evidence of progress in the quarterly results, the market is likely to keep management’s feet to the fire on this score.

Richard Hunter, head of markets at interactive investor, added: "While there are many hits in evidence, the misses have taken centre stage with the Wealth business finding itself the focus of attention.

"After revenue growth of 15% and 23% for the first two quarters, the number fell by 3% in the latest period. The wider concern is that the group has been pushing towards the affluent sector and, while the year-to-date pre-tax profit number remains ahead by 9% to $3.7 billion, it remains to be seen whether his is the beginning of a trend. This also undermines, at least temporarily, the group’s aspirations for the unit.

"Despite this shock, there is little of concern elsewhere as the numbers quite simply stack up. The strength and diversity of the business is more than sufficient to pick up the Wealth slack, with its other units clearly in rude health."

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