HSBC reports soaring Q3 profit, falls short of market expectations
HSBC Holdings (LSE: HSBA) announced on Monday a significant surge in third-quarter pretax profit to $7.71 billion, more than doubling from $3.23 billion the previous year. The remarkable increase was attributed to the positive impact of a higher interest rate environment. However, the figure fell short of the $8.10 billion estimated by analysts, denting market expectations.
The bank’s diluted and basic earnings per share rose to $0.29 from $0.10, reflecting this robust performance. Net interest income experienced a 15% rise to $9.25 billion from $8.01 billion, accompanied by a 5.3% increase in net fee income to $3.00 billion from $2.85 billion. Despite these gains, net operating income of $15.09 billion fell short of analyst predictions of $16.24 billion.
HSBC attributed part of the increase in profits to a $2.3 billion impairment in the third quarter of 2022 related to the planned sale of its retail banking operations in France. This impairment was partially reversed as the completion of the transaction became uncertain, and the bank now plans to reclassify these operations to “held for sale” in the fourth quarter of 2023.
The bank’s net interest margin rose to 1.70% from 1.51% a year prior but slipped slightly from 1.72% in the previous quarter. Meanwhile, HSBC’s Common Equity Tier 1 (CET1) ratio increased to 14.9% from 14.2% the previous year, driven by capital generation and lower risk-weighted assets.
In response to the strong financial performance, HSBC declared an interim dividend of $0.10 per share and revealed plans for a $3.0 billion share buyback, set to commence shortly and conclude at the time of its full-year results announcement on February 21.
Looking ahead, HSBC reasserted its commitment to achieving a return on average tangible equity in the mid-teens for 2023 and the following year, excluding the impact of material acquisitions and disposals. The bank also maintained its guidance for net interest income in 2023, targeting over $35 billion, building upon the achievement of $32.61 billion in 2022.
HSBC CEO Noel Quinn expressed optimism about the bank’s performance, stating, “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. There was good broad-based growth across all businesses and geographies, supported by the interest rate environment. Our Wealth business also gained further traction, attracting $34 billion of net new invested assets in the quarter and growing wealth balances by 12% compared with last year.”
Shares in HSBC were up 0.4% at HK$58.30 each in Hong Kong before the midday break on Monday, signalling cautious investor optimism despite the slightly lower-than-expected profit figures.
