HSBC PLC on Tuesday reported ‘broad-based profit generation’ across its global operations in the first half, revising its annual guidance upwards slightly and announcing another quarterly dividend and share buyback.
The Asia-focused lender said pretax profit jumped to $21.66 billion from $8.78 billion a year before. This included a $2.1 billion reversal of an impairment related to the sale of its retail banking operations in France, and a $1.5 billion provisional gain on acquiring the UK arm of Silicon Valley Bank.
Back in March, HSBC bought the UK arm of the failed Silicon Valley Bank for the nominal price of £1.
‘There was good broad-based profit generation around the world, higher revenue in our global businesses driven by strong net interest income, and continued tight cost control,’ said Chief Executive Officer Noel Quinn.
Thanks to the higher interest rate environment globally, net interest income rose to $18.26 billion from $13.39 billion. This helped to bring overall revenue to $36.88 billion from $24.55 billion.
It budgeted $1.3 billion for expected credit losses and other credit impairment charges. This reflects a ‘more stable outlook’ in most markets, though inflationary pressures persist, the bank noted.
The bank announced a second interim dividend of $0.10 per share, as well as its second share buyback of the year for up to $2 billion.
CEO Quinn noted ‘substantial further distribution capacity’ is still expected ahead.
The bank’s common equity tier 1 capital ratio rose to 14.7% at the end of June, from 14.2% at the end of the fourth quarter of 2022. This was driven by capital generation net of the dividend accrual, and helped by the reversal of impairments related to the French disposal and the gain from SVB UK.
Looking ahead, HSBC raised its guidance for return on tangible equity for 2023 and 2024, now expecting to reach the mid-teens, excluding the effects of material acquisitions and disposals. Back in May, it had guided for ‘at least’ 12%.
In the first half, it achieved annualised RoTE of 18.5%, excluding material acquisitions and disposals, compared to 10.6% the prior year. Meanwhile, net interest margin improved to 1.7% in the first half form 1.2% a year before.
‘Our strategy has enabled us to further strengthen our balance sheet, providing us with a good platform for growth in the current interest rate cycle, while maintaining cost discipline. This has given us the confidence to revise our returns guidance for 2023 and 2024,’ HSBC explained.
It also slightly raised its guidance for 2023 full-year net interest income to ‘above $35 billion’ from its previous forecasts of ‘at least’ $34 billion. The guidance is based on the current market consensus for global central bank rates, it noted.
‘There is still much work to do, especially given the many challenges in the global economy, but I am confident about the future as we move further into the next phase of our strategy and focus on opportunities to drive value creation, diversify our revenue and retain tight cost control,’ Quinn added.
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