HSBC shares fall on weak underlying profits
HSBC shares have fallen in early trading after the bank revealed shrinking underlying profits and warned of a "very challenging" outlook.
Its shares were 6% lower in Wednesday afternoon trading in London.
Headline profit before tax was actually up 66% to $5.2bn (£3.2bn) in the third quarter of the year, mainly thanks to a revaluation of its own debts, the value of which has fallen in fretful markets.
But underlying profits fell 36% due to weak business, and bad debts in the US.
"The outlook for the global economy is very challenging as problems in developed markets begin to affect growth rates around the world," the bank said in its interim results.
HSBC repeated a warning that it may relocate its headquarters away from the UK, blaming new, stricter rules on capital - the amount of money they have to provision against potential future losses.
The UK government plans to introduce a ringfence for banks, requiring them to put their UK operations in a separate subsidiary, and is requiring them to significantly raise their capital levels, particularly for the UK business.
US bad loans
HSBC revealed that it had $13.7bn in direct exposure to troubled southern European economies - including $5.3bn to Italy - a comparatively modest figure compared with its $122bn in loss-absorbing core tier 1 capital.
Business levels at its investment banking unit continued to suffer, with profits down by more than half compared with the previous quarter, to $1bn.
"Trading conditions showed some improvement during October, but they remain very difficult and continuing turbulence in global markets may result in further downside risk," the banks said.
Meanwhile, impairment charges and other provisioning for credit risks increased by $1bn in the three month period, the banks said, with the bulk coming from its North American business.
"The shares have fallen foul of high expectations," said Richard Hunter, head of equities at stockbrokers Hargreaves Lansdown.
"HSBC remains largely exposed to economies in Asia which continue to enjoy burgeoning growth when compared to their peers in developed economies.
"The strength of the bank's capital position and global growth prospects continue to underpin prospects."
The lender is currently going through a major cost-cutting programme, which has already seen 5,000 job cuts, and is concentrating on its core Asia businesses.