HSBC's pre-tax profit down 86% to $843m in 3Q16

No thanks to the $1.7b loss on the sale of its Brazilian operations.

According to a release by HSBC, in 3Q16, reported profit before tax (PBT) of $0.8bn was $5.3bn lower than in 3Q15. This was mainly due to a net unfavourable movement of $5.4bn in significant items and the adverse effect of foreign currency translation movements of $0.3bn. Movements in significant items included:

• adverse fair value movements of $1.4bn arising from changes in credit spreads on our own debt designated at fair value, compared with favourable movements of
$1.1bn in 3Q15;
• a $1.7bn loss recognised on the sale of our Brazil business to Banco Bradesco S.A., which completed on 1 July 2016 (in 3Q16, the operating results of our Brazil
business were minimal);
• costs to achieve of $1.0bn in 3Q16 compared with $0.2bn in 3Q15; and
• UK customer redress of $0.5bn in 3Q16 compared with $0.1bn in 3Q15.

These items had the effect of reducing reported PBT in RBWM, CMB and GB&M, although PBT in GPB rose. Excluding all significant items and the adverse effects of foreign currency translation differences between the periods, PBT rose by $0.4bn. The business drivers affecting our performance are covered in detail in the section below.

Reported revenue of $9.5bn was $5.6bn lower than in 3Q15, notably driven by the adverse movements in the credit spread on our debt as mentioned above, and the unfavourable effects of foreign currency translation of $0.7bn between the periods. In addition, our reported revenue includes a loss recognised on the sale of our Brazil business of $1.7bn in 3Q16 compared with operating revenue of $0.9bn in Brazil in 3Q15. As a result of these items, reported revenue fell in all of our global businesses.

Reported LICs of $0.6bn were $0.1bn lower than in 3Q15, notably driven by the sale of our business in Brazil, where we recorded $0.2bn of LICs in 3Q15.

Reported operating expenses of $8.7bn were $0.3bn lower, as the adverse impact of significant items mentioned above (including the operating expenses for Brazil of nil in 3Q16 compared with $0.7bn in 3Q15) was broadly offset by the favourable effects of foreign currency translation between the periods of $0.4bn. Operating expenses fell in RBWM, CMB, GB&M and GPB, partly offset by a rise in Other.