TWO OF Europe's largest lenders' profits have smashed expectations, boosted by central banks cranking up interest rates to tame historic high inflation.

Britain's biggest bank HSBC notched $3.1bn (£2.74bn) in profits over the three months to September, while Swiss giant UBS bagged $1.73bn over the same period, the pair announced yesterday.

The profit overshoot was driven by the Bank of England and European Central Bank raising borrowing costs steeply to curb rising prices in the UK and eurozone.

HSBC's net interest margin, a key source of revenue for banks, widened 38 basis points over the last quarter, sending its net loan income up more than $1bn over the last quarter.

UBS's net interest income jumped 14 per cent to $223m.

The duo's profits did fall sharply compared to last year.

HSBC's results kicked off third quarter UK bank earnings yesterday. Experts expect lenders to register a bumper profit take, likely sparking Labour party calls for a windfall tax - similar to that imposed on energy firms - to be brought in.

Those concerns as well as others saw HSBC's FTSE-100 listed shares tumbling yesterday, shedding more than six per cent. UBS's shares rose.

HSBC has been embroiled in a demerger campaign launched by its biggest shareholder, Chinese insurer Ping An.

Ping An wants HSBC to split out its Asia business to unlock value for shareholders, many of whom are Hong Kong retail investors who were starved of payouts during the pandemic as a result of UK regulators blocking banks from redistributing profits.

Yesterday's earnings will likely strengthen Ping An's break-off argument.

Profits in the Asia business came in at $3.51bn in the past quarter. However, the Europe business, which houses HSBC UK's operations, swung from a $630m profit to a $1.57bn loss over the same period.

HSBC yesterday named Georges Elhedery as its new chief financial officer.

Noel Quinn, the bank's chief, said under his stewardship, it had "retained a tight grip on costs, despite inflationary pressures".

(c) 2022 City A.M., source Newspaper