Third-quarter results from HSBC Holdings PLC (LSE:HSBA) showed better growth in the right areas, analysts said, as banking net interest income (NII) was upgraded.
Profit before tax and notables was 9% above the average City analyst estimate, said UBS, though a $1.1 billion Madoff-related charge announced yesterday was not included in the consensus.
Income 5% better than expected, mainly thanks to NII being 4% higher than anticipated, and fee and other income 6%.
The bottom line was hit by the Madoff provision and another $0.3 billion provision for the French National Financial Prosecutor investigation.
Share buybacks had already been suspended earlier in the month to accrue capital to complete the purchase of the rest of Hang Seng Bank.
Full-year guidance was upgraded for banking NII to "$43 billion or better" from the previous US$42 billion, though the consensus was already nearer $42.5 billion.
CEO Georges Elhedery for return on tangible equity was now expected to be "mid-teens, or better", if excluding notable items.
HSBC shares climbed 4.4% to 1,048p on Tuesday, recovering from a recent dip after hitting a record high earlier in the month.
UBS summarised the results as showing "better growth in the right places" but retained a 'neutral' stance on the shares and 980p price target.
Shore Capital also kept its 'hold' rating, with a fair value for the shares of 985p.
Analysts at Jefferies said it was a "strong set" of numbers driven by strength in NII, while "clearly the debate is now on '26 & '27 estimates where consensus looks undemanding" and where the market will start to focus more now.
They noted that the balance sheet growth was "deposit-led", as loan growth remained low, though UK lending was an area of strength.
"This balance sheet growth set-up is ROTE-accretive and ROTE ex notable items was around 18% YTD, 14% reported."
Max Harper, analyst at Third Bridge, said the results "show solid progress toward its 2027 goals, proving the bank can still deliver despite legacy headwinds" such as the Madoff Ponzi scheme.
Third Bridge highlighted HSBC's leadership in transactional banking, "though continued market exits, caused by their shift toward more profitable regions could weaken the global network model that underpins its long-term income potential".
As for headwinds, the bank's focus on reallocating growth to more profitable regions "runs counter to its traditional global network model, which could limit longer-term income opportunities and wallet share capture", though the Hang Seng Bank acquisition "strengthens control over semi-impaired commercial property loans and signals renewed confidence in Hong Kong’s recovery".