HSBC shares top the FTSE100

The UK’s largest bank HSBC’s share price rose to a six year high today, helping to cushion some of the losses on the FTSE100 today after reporting Q3 profits of $8.5bn, taking total profits for the year before tax to just over $30bn. The bank also announced another $3bn in share buybacks, and an interim dividend of 10c a share.

While profits for the quarter were well up from a year ago, they were down in Q2 largely due to a decline in net interest margin to 1.46% from 1.62% in Q2, and 1.7% a year ago.

Today’s announcement saw the bank post solid improvements in both its UK and its Asia divisions, with the Asia business seeing strong growth in wealth management, while the UK business saw strong growth in mortgage lending.

Last week CEO Georges Elhedery announced that the bank would be looking to split itself into two sections, between eastern and western divisions, with some suggesting that this could be the first step towards a formal split of the two regions.

For several years now HSBC management has come under pressure from activist investor Ping An, to become more efficient, as well as looking to focus on its domestic markets. The bank’s relationship with the Chinese government has also come under scrutiny in the wake of the treatment of some of its account holders in the wake of the pro-democracy protesters in Hong Kong.

While Elhedery was at pains to insist that the new structure was in no way to a precursor to a split of the bank, it does appear that the building blocks are being put into place if the pressure to do so becomes too much and HSBC is unable to straddle the competing strands of its relationship with the Chinese government, and its western markets.

Today’s Q3 results offered little in the way of insight into the bank’s future plans with the changes due to take effect from January next year, however they do show a bank that continues to perform well across both of its biggest markets.

Given the balancing act HSBC has to perform between its two major regions, the reality is it does make most of its money in Asia, with $16bn in profits so far this year, while the UK bank has seen a return over the last 9 months of $5.56bn, out of a total of $30bn year to date.

This could mean that when push comes to shove we could well get a split, and this month’s recent announcement is likely the first step towards such a scenario playing out in the not too distant future.