HSBC says pre-tax profit more than doubled in third quarter

HSBC has enjoyed bumper profits thanks to the high interest rate environment – Copyright AFP Daniel LEAL

Banking giant HSBC said on Monday that pre-tax profit in the third quarter more than doubled to $7.7 billion, reflecting the “positive impact of a higher interest rate environment”.

The on-year spike from $3.2 billion was partly down to an impairment in the same period last year over the planned sale of the firm’s retail banking operations in France, which has since stalled, it said.

The London-listed lender reported third-quarter revenue grew 40 percent to $16.2 billion as higher rates “supported growth in net interest income in all of our global businesses, and non-interest income increased”.

“We have had three consecutive quarters of strong financial performance and are on track to achieve our mid-teens return on tangible equity target for 2023,” group chief executive Noel Quinn said in an earnings release statement.

“There was good broad-based growth across all businesses and geographies, supported by the interest rate environment,” he added.

The bank also announced a new $3 billion share buyback programme, following two similar initiatives this year.

HSBC has also announced three quarterly dividends totalling $0.30 per share this year.

“This underlines the substantial distribution capacity that we have, even as we continue to invest in growth,” Quinn said. 

HSBC’s stock in Hong Kong has risen nearly 20 percent since the start of the year, while the benchmark Hang Seng Index has dropped 14 percent.

In its Monday statement, the bank noted that the growth forecasts for Hong Kong and mainland China had been lowered as their post-pandemic recovery weakened.

Measures announced by Beijing in August have “not yet translated into a meaningful rebound in property market fundamentals” in China, it added.

As part of its outlook, the bank said it will “continue to monitor risks related to our exposures in mainland China’s commercial real estate sector closely, and there remains a degree of uncertainty in the forward economic outlook, particularly in the UK”.

HSBC, which makes two-thirds of its revenue from Asia, has said it will develop its wealth business in the region as a key strategic priority to diversify revenue.

The lender on October 9 announced an agreement to buy Citigroup’s retail wealth management portfolio in mainland China.

“The transaction will be another milestone as HSBC further strengthens its wealth capabilities in Asia,” the bank said in an earlier statement.

It said on Monday it expected a net interest income of more that $35 billion this year, and “remained committed to targeting a return on average tangible equity in the mid-teens for 2023 and 2024”.

Operating expenses this year are expected to grow, with around one percent of the rise attributed to a “potential increase in performance-related pay”.

The British government said last week it would press ahead with plans to axe the cap on bankers’ bonuses.