HSBC shares are higher by 3.0% in London after providing a third-quarter trading update early Wednesday showing improved y/y profit in Q3 and through the first nine months of the year. HSBC said its Q3 U.S. subprime mortgage loan impairment charge of $3.4B is $1.4B more than expected from extrapolating first-half trends. However, record revenues in certain Corporate, Investment Banking and Markets [CIBM] businesses helped offset the writedowns. In a statement, HSBC warned, "Deterioration in US housing markets is affecting consumer finance credit quality more broadly than hitherto and loan impairment charges are expected to remain high in these conditions. There is the probability of further deterioration if the current housing market distress continues and further impacts the broader economy." On a positive note for shareholders, HSBC also said it has "very little direct exposure to U.S. subprime and mortgage-backed CDOs and hence, since the end of the third quarter, has not suffered the further significant write-downs of this asset class disclosed by a number of other financial institutions." HSBC noted it was achieving strong growth in Asia, the Middle East and most of Latin America. Performance in the U.K. led its Europe segment to higher y/y growth, while in the U.S. the focus is on restructuring. HSBC's ADRs gained 3% to $88.78 on Tuesday and were up 2.5% to $91.04 in thin pre-market activity.
Commentary: HSBC's U.S. Unit May Boost Subprime Reserves • The Short Case on HSBC Holdings • Activist Investor Increases Pressure on HSBC
Stocks to watch: HBC. Competitors: C, BAC, JPM, BCS, RBS, DB, UBS. ETFs: EWU, ADRU, ADRD
Related: HSBC full trading update [pdf]