HSBC reported a 10% rise in third quarter profits yesterday, helped by tighter cost control and fewer losses from bad loans, and confirmed it was being investigated as part of a global probe into currency market trading manipulation.

Europe’s largest bank said underlying pretax profit was $5.1bn for the three months to September 30 — up 30% on a statutory basis — with strong Hong Kong and British markets together accounting for more than half of earnings and offsetting a fall in Latin American profits.

Chief executive Stuart Gulliver said he saw evidence of a broadening recovery in which the US should continue to grow, albeit slowly, and the UK would outperform the eurozone.

“There are signs for optimism around. We’ve always been confident China would have a soft landing ... which is supportive for the rest of Asia-Pacific,” he told a conference call with reporters.

Gulliver also confirmed that HSBC was co-operating with Britain’s Financial Conduct Authority, which is leading an investigation into the $5.3tn-a-day foreign exchange market that has spread to include regulators in the US, Asia and Switzerland. Traders from some of the world’s top banks, including Barclays, Citigroup and JP Morgan have been suspended or put on leave.

HSBC, which has vowed to instill a more responsible corporate culture after it was fined a record $1.9bn last year for lax anti-money laundering compliance, has not taken any action against its staff, Gulliver said.

“We haven’t suspended anyone. It’s at a very early stage and the names we’ve been given so far don’t work for us any more,” he said. The bank said no-one had been fired, and added that it had been contacted in October.

Despite the mushrooming FX probe, with its echoes of the recent interest rate fixing scandal, investors focused on HSBC’s improved quarterly performance and growth prospects.

HSBC led the FTSE 100 index higher with a 2.4% gain by 1000 GMT and kept the European banking index in positive territory after a call for higher capital requirements by the Swiss finance minister over the weekend dragged sector heavyweights UBS and Credit Suisse sharply down.

“If investors are seeking a strong and dependable bank, HSBC could be the place to look. The key metrics were, on the whole, progressive,” said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers.

The rise in HSBC’s profits, in line with analysts’ forecasts, was underpinned by a 4% dip in losses from bad loans and a $700mn fall in operating expenses to $9.6bn, although that was mainly due to the absence of one-off items last year.

Underlying costs were up on the year due to investments, wage inflation and regulatory costs. Revenues were flat.

HSBC said its capital position improved, with a core tier one ratio, a key measure of financial strength, of 10.6% under tough new rules and a leverage ratio of 4.2%, above an international requirement of 3%.

But the bank cautioned that there was significant regulatory uncertainty on the horizon as financial watchdogs around the world continue to refine new rules insisting banks hold more capital in order to shore them up against any future financial crisis.

That warning was borne out over the weekend when Swiss Finance Minister Eveline Widmer-Schlumpf was quoted as saying authorities there were discussing raising the leverage ratio for Swiss banks to 6-10%, two or three times the required ratio set out by the global Basel III accord, which is being phased in by 2019.

 

 

CME Group

CME Group, the largest US futures exchange operator, yesterday reported a rise in quarterly profit amid increased demand for over-the-counter clearing.

Net profit at the Chicago-based exchange operator rose to $236.7mn, or 71¢ a share, in the third quarter, from $218mn, or 66¢ a share.

Adjusted earnings were 75¢ a share. Analysts expected 73¢, according to Thomson Reuters I/B/E/S. Revenue rose to $714.6mn from $683.2mn.

Regulators globally have pushed more over-the-counter derivatives into clearinghouses and onto regulated trading venues after problems in the $600tn swaps market exacerbated the 2007-2009 financial crisis.

Average daily trading volume at CME Group during the quarter was 12mn contracts, up 11% from a year ago, and included 29% growth in interest rate volume and 10% growth in metals volume, the company said.

 

 

Kellogg

Kellogg reported a 3% rise in quarterly profit, helped by a fall in cereal-making costs, and said it would slash 7% of its workforce by 2017.

Net income of the world’s largest cereal manufacturer rose to $326mn, or 90¢ per share, in the third quarter ended September 28 from $318mn, or 89¢ per share, a year earlier.

The maker of Corn Flakes, Chocos cereal and Eggo waffles said revenue fell marginally to $3.72bn.

Kellogg announced a new cost-cutting programme called Project K to strengthen existing businesses in its core domestic markets and increase growth in developing markets.

The programme is expected to result in total pre-tax charges of between $1.2bn and $1.4bn, the company said.

 

 

Westpac

Australian banking giant Westpac yesterday posted a 14% jump in full-year net profit with all core divisions performing well, capping a bumper year for the country’s major lenders.

The result in the 12 months to September 30 came in at A$6.82bn (US$6.44bn), compared with A$5.97bn the previous year.

Cash earnings — the measure more closely watched by analysts, which strips out volatile items — were up 8% at A$7.10bn, slightly better than expectations, with its share price lifting 0.41% to A$34.72 in early trade.

The solid result follows a record annual profit last week for ANZ Bank, up 11% to A$6.3bn, and a 33.6% jump to A$5.45bn for National Australia Bank.

With the nation’s biggest lender, the Commonwealth Bank of Australia, posting an 8% rise in its annual result to a record A$7.68bn in August, their collective profits soared to nearly A$27bn for 2013, despite a slowing economy.

Westpac, the country’s second largest bank by market capitalisation, said all of its operations contributed higher revenue and earnings amid stronger demand for home loans, improving asset quality and solid growth in customer deposits.

“I am very pleased with our 2013 result. It demonstrates strength, consistency, careful balancing of growth and return, and disciplined execution of our strategy,” chief executive Gail Kelly said.

“I am particularly pleased that all of our operating divisions and brands contributed positively to the result. It demonstrates the quality of the performance, with cash and core earnings up across the board.”

The company announced a final dividend of 88¢ and a special dividend of 10¢, taking its annual payout to shareholders to A$1.74 per share.

While Kelly said the bank would continue to operate cautiously due to global uncertainty and a slowdown in mining investment impacting the Australian economy, she indicated a recent improvement in consumer confidence boded well for the next 12 months.

“There is no doubt that domestically we are seeing a pick-up in consumer confidence which we expect will translate to a gradual increase in credit growth,” she said.

“The spring season is already seeing momentum accelerate, and our portfolio of brands is well positioned to benefit from this.

“Equally encouraging is the recent improvement in business confidence, which is central to businesses being willing to borrow and invest.”

 

 

Audi

German luxury-car maker Audi stuck to its full-year profit target even as higher costs of plants and technology inflicted a double-digit drop in third-quarter earnings.

The Volkswagen-owned division is pushing costly overseas expansion, adding capacity in China, Mexico and Brazil as the brand aims to topple luxury-sales champion BMW by the end of the decade.

Audi’s second Chinese factory will start production at the end of the year while the carmaker is spending almost €1bn ($1.35bn) on a new site in Mexico to build the next generation of the Q5 compact SUV from 2016.

“We’re making high upfront expenditures and investments now and in upcoming years in order to create an even stronger global position for Audi,” finance chief Axel Strotbek said in the quarterly earnings statement yesterday.

Audi reaffirmed its goal to achieve an operating profit margin “at the upper end” of a target range between 8% and 10% this year, even as third-quarter operating profit plunged 17% to €1.10bn, missing the lowest estimate of €1.13bn in a Reuters poll.

Profit from Audi, which accounts for about 40% of VW group operating earnings, funds the parent’s drive to surpass General Motors and Toyota as the world’s biggest carmaker by 2018.

Daimler’s Mercedes-Benz, which also includes the Smart city-car brand, posted a 23% jump in third-quarter earnings before interest and tax (EBIT) to €1.2bn.

However Audi’s third-quarter operating margin of 9.4% beat the 7.3% return on sales at Mercedes.

Audi, based in Ingolstadt, Germany, also stood by a goal to hit its sales target of 1.5mn cars and SUVs in 2013, two years early.