By Lawrence White and Steve Slater
HONG KONG/LONDON (Reuters) - HSBC profit jumped by a third in the latest quarter as a drop in fines for past misconduct more than offset the impact of a slowdown in Asia and increased spending on regulatory compliance.
Europe's biggest bank also said on Monday that it will step up its push into investment banking activity on the Chinese mainland by establishing a majority-owned securities venture in the country.
Costs related to fines and compensation for customers fell by $1.4 billion in the three months to Sept. 30 from a year ago, marking the bank's progress on conduct issues that have marred recent quarterly results.
Yet the London-based bank spent $2.2 billion on regulation and compliance in the first nine months of 2015, up 33 percent year on year, even as the British government looks to take a more accommodative stance towards the industry.
HSBC's underlying revenue fell 4 percent year on year to $15.1 billion compared, with plunging stock markets and slowing economic growth hitting its business in Asia, including its Hong Kong powerhouse.
"HSBC management have done a very good job of trying to correct its internal problems, but these results show no bank can improve revenues if the global economy is against it," said Jim Antos, analyst at Mizuho Securities Asia in Hong Kong.
The bank posted third-quarter profit of $6.1 billion, up from $4.6 billion and above the average analyst forecast of $5.2 billion. Adjusted profit fell 14 percent to $5.5 billion, taking into account the lower fines and other one-off items.
HSBC's London shares were down 1.3 percent at 500.8 pence by 1210 GMT, underperforming a slightly higher European bank index. The shares are down 18 percent this year -- hurt by concerns about slowing Asian growth -- compared with a 2 percent rise for the European banking sector.
HSBC said there had been "no visible impact" on credit quality in Asia, with losses from bad loans coming in lower than analysts had expected.
There was mixed news on costs. Expenses were up 2 percent from a year ago but down 4 percent from the previous quarter and Chief Executive Stuart Gulliver said his plan to squeeze costs was "gaining traction" and further improvement would be seen, including from job cuts.
Gulliver said compliance costs could continue to rise into next year, however.
"Compliance spending will probably peak in 2016, which is when we've rolled out a number of systems solutions that enable us to get economies of scales from systems," he said.
Some investors have criticised the pace of cost-cutting and improvement in returns as too slow, but Chairman Douglas Flint said the board is fully behind Gulliver and his team.
"Management has good traction on delivering against the plan that has been set out, so I don't know why anybody would want to change horses mid-course of a strategy that was well received and which is being delivered against," Flint told reporters when asked if there was pressure for change.
HSBC set 10 strategic goals in June, including a 25 percent cut to risk-weighted assets, the sale of operations in Turkey and Brazil and $4.5 billion to $5 billion in cost savings.
The bank said it is nearly 30 percent of the way towards completing the reduction in its assets.
The goals also include assessment of whether it should move its headquarters out of Britain, with Hong Kong viewed as the most likely destination.
HSBC said it had made progress on this but the decision could slip beyond its original year-end deadline, echoing comments made by Gulliver last month.
(Editing by Muralikumar Anantharaman and David Goodman)