HSBC profit slumps by 86% as it books loss on Brazilian bank sale

HSBC's profit dropped sharply after Europe's largest bank booked a loss from the sale of its Brazilian unit and was buffeted by currency fluctuations.

It said its third-quarter pre-tax profit slumped by 86% to $843m (£678m), after registering $1.7bn loss from the earlier sale of its Brazilian unit as the group restructures. Analysts had expected a profit of $2.45bn.

The firm also pointed to customer compensation in America and currency moves for the fall in profit.

HSBC, in common with many banks, is struggling to boost profits in a low interest rate environment combined with increased scrutiny from regulators.

For the first nine months of the year, HSBC reported pre-tax profit of $10.6bn, 46% lower than the same period the year before.

Revenue was also down in the third quarter, at $9.5bn — a fall of $5.6bn compared with a year ago.

However, on an adjusted basis — excluding one-off losses and currency fluctuations — profit rose 7% to $5.6bn, beating analysts' expectations.

HSBC completed the sale of its Brazilian business to Brazilian financial services group Banco Bradesco in July in a deal worth £5.2bn.

HSBC added its $2.5bn share buyback programme announced in August this year was now 59% complete and it expected to finish by the end of this year or early 2017.

Cut to dividend

However, the bank cut its third interim dividend from $0.30 to $0.10.

But chief executive Stuart Gulliver pointed out that a new method of accounting for capital lifted HSBC's common equity tier one ratio — a closely watched measure of financial strength — to 13.9%, up from 12.1% at the end of June.

Gulliver said: "This is another action forming part of our ongoing capital management of the group that reinforces our ability to support the dividend, to invest in the business and, over the medium term, to contemplate share buybacks, as appropriate."

Analysts at Bernstein said: "We feel this should be enough to allow the bank to maintain the dividend next year out of capital even as earnings decline."

In July last year Gulliver announced a wide-ranging overhaul across the group that included 25,000 job cuts around the world – including up to 8,000 in the UK – as the bank focused on Asian markets.