HSBCs after tax profit jumps over 235 year on year as it announces

HSBC’s after-tax profit jumps over 235% year-on-year as it announces $3 billion share buyback

  • HSBC’s profit after tax was $6.26 billion in the three months to September, up 235% compared to $2.66 billion in the same period last year.
  • Pretax profit rose $4.5 billion to $7.7 billion in the quarter, primarily due to a higher interest rate environment.
  • Revenue rose to $7.71 billion in the third quarter, up from $3.23 billion a year earlier.

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HSBC’s profit after tax was $6.26 billion in the three months to September, up 235% compared to $2.66 billion in the same period last year.

Europe’s largest bank by assets also reported pretax profit in the quarter, rising $4.5 billion to $7.7 billion, largely due to a higher interest rate environment.

However, the figures fell short of economists’ expectations, who had forecast third-quarter profit after tax of $6.42 billion and pretax profit of $8.1 billion.

HSBC said the increase was partly due to a $2.3 billion impairment charge in the third quarter of 2022 related to the planned sale of its retail banking business in France.

Of this, $2.1 billion was reversed in the first quarter of 2023 as the completion of the transaction became less certain.

“We now expect to reclassify these operations as held for sale in Q4 2023, at which point the impairment would be reinstated,” it said.

Revenue rose to $7.71 billion in the third quarter, up from $3.23 billion a year earlier. HSBC also attributed this to the higher interest rate environment and said it supported net interest income growth across its global businesses.

Net interest margin – a measure of lending profitability – was 1.7%, up 19 basis points year-on-year and above estimates of 1.68%.

However, the NIM fell by two basis points compared to the previous quarter. This reflected an increase in customers shifting their deposits to futures products, particularly in Asia, HSBC said.

In the nine months ended September, profit after tax was $24.33 billion, compared with $11.59 billion in the first nine months of 2022.

HSBC’s Hong Kong-listed shares rose 0.43% following the announcement.

In light of the results, the bank’s board approved a third interim dividend of 10 cents per share. HSBC also said it will initiate a further share buyback worth up to $3 billion, which is expected to “commence shortly” and be completed by the release of full-year results on February 21, 2024.

“We are pleased to reward our shareholders again. “We have now announced three share repurchases in 2023 totaling up to $7 billion, as well as three quarterly dividends totaling $0.30 per share,” CEO Noel Quinn said in the press release. “This underscores the significant distribution capacity we have, even as we continue to invest in growth.”

The buyback is expected to have an impact of 0.4 percentage points on the common equity Tier 1 capital ratio (CET1 ratio), the bank said. The CET1 ratio is a measure of the financial resilience of European banks.

Going forward, HSBC plans to reduce its CET1 ratio to 14-14.5% from the current 14.9%. This showed that the dividend payout ratio for 2023 and 2024 is 50%, with no significant items of note.

Correction: The headline has been updated to clarify that HSBC has announced a $3 billion share buyback.