HSBC Profit Rises; Bank Is Cooperating With Foreign Exchange Inquiry

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A branch of HSBC in London.Credit Facundo Arrizabalaga/European Pressphoto Agency

LONDON – HSBC, Britain’s biggest bank, said on Monday that third-quarter earnings rose 10 percent from the period a year earlier, helped by its cost-reduction program.

The bank also was the latest to admit that it was the subject of an investigation by several authorities into its conduct in the foreign exchange market. HSBC said it was contacted by regulators last month and that it had not fired or suspended anyone in connection with the investigation.

The bank said its pretax profit rose to $5.1 billion in the three months ended Sept. 30 from $4.6 billion in the third quarter of 2012, beating some analysts’ expectations.

The bank’s chief executive, Stuart T. Gulliver, said he was optimistic that the global economy would continue to strengthen. “We see reasons for optimism with some evidence of a broadening recovery,” he said in a statement. There were signs that growth in China was stabilizing and that the United States and Britain would continue to grow, he said.

HSBC, based in London, said it had cut an additional $400 million of costs in the third quarter, bringing the total to $4.5 billion since the beginning of 2011. The bank set aside $1.6 billion for bad loans and other credit charges in the period, less than the $1.7 billion for the third quarter of 2012.

The bank’s core Tier 1 capital ratio, a measure of the bank’s financial strength and ability to absorb any potential future losses, improved to 13.3 at the end of September from 12.7 percent at the end of June.

HSBC shares rose almost 3 percent in trading in London on Monday, and are up 7.2 percent this year.

HSBC has done better than some of its rivals during the financial crisis, mainly because of its business in Asia, which accounts for more than half of its earnings. But slowing growth in China and Latin America at the beginning of the year caused the bank to miss some analysts’ expectations for earnings and raised some concerns about its growth prospects.

The bank has also been struggling with some legacy issues, including a long-running lawsuit in the United States related to a consumer-loan and credit card business that it acquired more than a decade ago. HSBC last month received a record $2.46 billion final ruling in a securities class-action lawsuit against the business formerly known as Household International for accusations that it made false and misleading statements that inflated the company’s share price. HSBC said it would appeal.

Last year, HSBC agreed to a record $1.92 billion settlement with the authorities on accusations that it illegally transferred money for nations like Iran and that it allowed Mexican drug cartels to move funds through its American subsidiaries.

Mr. Gulliver has said that he aims to restore HSBC’s reputation in the United States and that the bank has been expanding its control and compliance units even as it has continued to eliminate jobs elsewhere. Seeking to increase profitability, the bank has closed or sold 46 businesses and investments since 2011, including its credit card unit in the United States and its unit in Panama.

HSBC said it was cooperating with investigations into the foreign exchange markets. Last week, UBS and Deutsche Bank disclosed for the first time that they were cooperating with investigators in several countries into purported manipulation of foreign exchange markets. Nearly a dozen traders have been placed on leave in recent weeks at Barclays, Royal Bank of Scotland, Citigroup, Standard Chartered and JPMorgan Chase, according to people briefed on the investigations.