Higher interest rates help HSBC to triple quarterly profit
HSBC’s headline profit was helped by a reversal of a $2bn impairment it took against the planned sale of its French business
02 May 2023 - 10:23
bySelena Li and Lawrence White
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Hong Kong — HSBC reported on Tuesday that its quarterly profit tripled, beating expectations, as rising interest rates worldwide boosted the lender’s income and helped it pay a first quarterly dividend since 2019.
The strong results of HSBC and its Asian rival DBS underscore the boost to their balance sheets from aggressive policy tightening, even though it has brought banking sector turmoil, chiefly in the US
On Monday, regulators seized First Republic Bank and sold its assets to JPMorgan Chase, in a deal to resolve the largest US. bank failure since the 2008 financial crisis and draw a line under a lingering banking turmoil.
With the rate cycle nearing a peak, the challenge for the likes of HSBC and DBS would be to sustain their margins in the quarters ahead.
Europe’s largest bank posted a pretax profit of $12.9bn for the first quarter ended March, versus $4.2bn a year earlier. The results were better than the $8.64bn average estimate of 17 analysts compiled by HSBC.
Hong Kong shares of HSBC extended early gains and climbed more than 3% in afternoon trading.
HSBC’s headline profit was boosted by a reversal of a $2bn impairment it took against the planned sale of its French business, reflecting the fact that the deal may no longer go through.
It had warned in April that its France disposal could be in jeopardy over regulatory capital concerns for the buyer.
The London-headquartered bank also reported a delay in the time frame for the completion of the sale of its Canada business, a key part of its strategy to shrink in slow-growing Western markets where it lacks scale.
The bank said the planned $10bn sale, originally slated to be completed by the end of this year, will now only likely go through in the first quarter of 2024.
Dividend
HSBC has tried recently to accelerate its pivot to Asian markets, in part to head off calls from its biggest shareholder Ping An Insurance Group of China to spin off the Asia unit to boost shareholder returns.
It announced a dividend of $0.10 per share, its first quarterly dividend since 2019, following calls of shareholders to increase the dividend payout.
The lender also flagged the first of a new cycle of buybacks of up to $2bn.
“With the good momentum we have in our business, we expect to have substantial future distribution capacity for dividends and share buybacks,” CEO Noel Quinn said in the results statement.
HSBC, in common with other British lenders, reported deposit outflows for the quarter, if those it acquired by bailing out the local arm of failed US lender Silicon Valley Bank were discounted.
Big European banks have reported deposits falling as consumers faced with a cost of living crisis shop around for higher-paying products such as fixed-term deposits and investment funds.
Despite the surging profit, HSBC did not raise its key performance target of reaching a return on tangible equity of at least 12% from 2023 onwards, while analysts were estimating the key metric would be lifted.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Higher interest rates help HSBC to triple quarterly profit
HSBC’s headline profit was helped by a reversal of a $2bn impairment it took against the planned sale of its French business
Hong Kong — HSBC reported on Tuesday that its quarterly profit tripled, beating expectations, as rising interest rates worldwide boosted the lender’s income and helped it pay a first quarterly dividend since 2019.
The strong results of HSBC and its Asian rival DBS underscore the boost to their balance sheets from aggressive policy tightening, even though it has brought banking sector turmoil, chiefly in the US
On Monday, regulators seized First Republic Bank and sold its assets to JPMorgan Chase, in a deal to resolve the largest US. bank failure since the 2008 financial crisis and draw a line under a lingering banking turmoil.
With the rate cycle nearing a peak, the challenge for the likes of HSBC and DBS would be to sustain their margins in the quarters ahead.
Europe’s largest bank posted a pretax profit of $12.9bn for the first quarter ended March, versus $4.2bn a year earlier. The results were better than the $8.64bn average estimate of 17 analysts compiled by HSBC.
Hong Kong shares of HSBC extended early gains and climbed more than 3% in afternoon trading.
HSBC’s headline profit was boosted by a reversal of a $2bn impairment it took against the planned sale of its French business, reflecting the fact that the deal may no longer go through.
It had warned in April that its France disposal could be in jeopardy over regulatory capital concerns for the buyer.
The London-headquartered bank also reported a delay in the time frame for the completion of the sale of its Canada business, a key part of its strategy to shrink in slow-growing Western markets where it lacks scale.
The bank said the planned $10bn sale, originally slated to be completed by the end of this year, will now only likely go through in the first quarter of 2024.
Dividend
HSBC has tried recently to accelerate its pivot to Asian markets, in part to head off calls from its biggest shareholder Ping An Insurance Group of China to spin off the Asia unit to boost shareholder returns.
It announced a dividend of $0.10 per share, its first quarterly dividend since 2019, following calls of shareholders to increase the dividend payout.
The lender also flagged the first of a new cycle of buybacks of up to $2bn.
“With the good momentum we have in our business, we expect to have substantial future distribution capacity for dividends and share buybacks,” CEO Noel Quinn said in the results statement.
HSBC, in common with other British lenders, reported deposit outflows for the quarter, if those it acquired by bailing out the local arm of failed US lender Silicon Valley Bank were discounted.
Big European banks have reported deposits falling as consumers faced with a cost of living crisis shop around for higher-paying products such as fixed-term deposits and investment funds.
Despite the surging profit, HSBC did not raise its key performance target of reaching a return on tangible equity of at least 12% from 2023 onwards, while analysts were estimating the key metric would be lifted.
Reuters
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