HSBC Holdings PLC (LSE:HSBA) profits fell less than expected for the third quarter as a large legal one-off expense related to the Bernie Madoff case was offset by improved net interest income and a strong performance in its wealth management business.
Europe's largest bank also lifted its outlook for net interest income and return on tangible equity, which CEO Georges Elhedery said was thanks to the lender becoming simpler and more "agile".
Profit before tax of $7.3 billion, down roughly 14% compared to the same period last year but ahead of analyst expectations that averaged just under $6 billion.
Profits were hit by $1.4 billion of legal provisions on what the lender said were historical matters, including $1.1 billion related to litigation over the Madoff fraud, announced a day earlier, but benefited from currency swings. On a constant currency basis, profit before tax of $7.3bn was 15% lower.
Revenues grew 5% to $17.8 billion, where 15% growth in net interest income and 30% growth in wealth management was counterbalanced by lower fees and other income from foreign exchange and debt and equity markets in the corporate institutional banking arm.
Operating expenses rose 24%, mainly due to notable items, including litigation. HSBC said this provision would reduce its CET1 capital ratio by around 15 basis points.
The bank maintained its full-year guidance, now expecting 2025 net interest income of $43 billion or more, and forecast mid-teens or better return on tangible equity, excluding notable items.
CEO Elhedery said HSBC is "becoming a simple, more agile, focused bank, built on our core strengths. The intent with which we are executing our strategy is reflected in our performance this quarter, despite taking legal provisions related to historical matters."
HSBC said it would appeal a recent Luxembourg court decision related to the Madoff case and, if necessary, contest the amount payable in further proceedings.
Earlier this month, HSBC also announced plans to privatise Hang Seng Bank in a transaction valuing the Hong Kong-listed subsidiary at over HK$290 billion, though the market reception has been lukewarm.