HSBC Holdings is feeling the pinch and has resorted to slashing down its growth target for next year after reporting a more-than-anticipated 18 percent drop in quarterly pre-tax income.
HSBC has tried to step up cost-cutting measures in the face of a bleak economic environment arising from an ongoing trade war between China and the United States, a tightening monetary policy process, turmoil in Hong Kong, and Brexit.
Pre-tax profit on assets at Europe's largest bank was $4.9 billion for the third quarter ended Sept. 30, compared to almost $6 billion a year earlier, said HSBC in a statement.
The income was less than the bank's average estimate by analysts at $5.4 billion. The banking group's stocks issued in Hong Kong dropped more than 2 percent when trade resumed after the mid-day break.
The figures are the first under acting chief executive Noel Quinn and are widely viewed as a full-time report card on his appointment by investors and stakeholders. On Monday, Quinn said the bank will undergo more adjustments and planning.
"Parts of our market, especially Asia, were well up in the third quarter in a challenging environment," he said, adding that "quality was not appropriate in some pieces."
According to analysts, HSBC's previous plans are no longer sufficient to improve performance for its other businesses, despite a "tougher forecast for revenue growth."
HSBC said it did not expect to reach its 11 percent return on tangible equity (RoTE) by 2020, noting a "more demanding" sales forecast relative to this year's first quarter.
The London-based bank, which produces the majority of Asia's revenue and gain, said it would rebalance assets away from low-return industries and change its cost base.
Such move, or any continuing decline in the sales climate, can result in significant changes in the fourth quarter, analysts said.
Quinn has made no secret that he is eager to win Chairman Mark Tucker's permanent appointment, who said in August that it would take six to 12 months for the company to find a chief executive officer.
Quinn, a company executive since 1987, faces the tough task of showing progress on HSBC's core goals of further cost reduction and turning its ever-underperforming US sector around.
The bank's near-to medium-term outlook has also been clouded by Hong Kong's five-month anti-government protests, its single-biggest profit center.
Government data showed that bankruptcy petitions submitted by debtors in Hong Kong rose to 1,945 -- almost a fifth in the September quarter compared to the same period a year earlier.
