Over the past month, the share prices of HSBC (LON: HSBA) (HSBA.L) and Standard Chartered (LON: STAN) (STAN.L) have moved 6% and 1% higher, respectively. They have both released first quarter updates.
HSBC released its first quarter earnings update on 27 April. The bank reported a rise in pre-tax profit of 79% and an increase in after-tax profit of 82%. This was despite a fall in reported revenue of 5% that was caused by low interest rates, according to the company’s update.
The firm’s lower revenue was partly offset by adverse market impacts in life insurance and valuations in Global Banking and Markets in the prior period. There were also releases of allowances for expected credit losses during the first quarter of 2021 that reflected the improved economic outlook.
All of HSBC’s regions were profitable in the first quarter. Its operating expenses increased by 9% as a result of higher restructuring and other related costs from the previously announced transformation programme, as well as an increase in technology investment. For the quarter, return on average tangible equity was 6 percentage points higher at 10.2% on an annualised basis.
According to the bank, the economic outlook has improved and it now has increased confidence in its revenue growth plans. However, it also stated that there remains a high degree of uncertainty as countries emerge from the pandemic at different speeds. Overall, it expects mid-single-digit percentage growth in customer lending in 2021, although this is very dependent on the course taken by the pandemic. It continues to make good progress versus its transformation plans, according to the release.
In the past year the HSBC share price has risen by 11%. In the past five years it is 6% higher. The next release by the bank is due for 28 May, when it holds its annual general meeting. Its shares trade at 455p at the time of writing.
Fellow FTSE 100 bank Standard Chartered also released share price news in the past month. It updated investors on its first quarter performance on 29 April. Its income moved 9% lower year-on-year, while it was down 3% at constant currency. Its net interest margin broadly stabilised at 122 basis points, which is a 2 basis point decline quarter-on-quarter.
The firm’s expenses increased by 4% on a constant currency basis. This was mainly due to the impact of performance-related pay normalisation, with underlying efficiencies funding higher investment. Underlying profit before tax moved 18% higher, while statutory profit before tax was 59% higher than in the same quarter of the previous year. Standards Chartered’s return on tangible equity moved 220 basis points higher to 10.8%.
During the period, customer loans and advances increased by 4%. Its common equity tier 1 ratio of 14% is at the top of its 13-14% target range. The bank expects the economic recovery from Covid-19 to be volatile and uneven, but acknowledged the improvement in global economic prospects over recent months.
Over the past year the Standard Chartered share price has risen by 28%. It is up 5% over the past five years. Its AGM is due to take place on 12 May.