- Earnings beat forecasts on higher interest rates
- Non-recurring gains also helped top and bottom line
- Pressure from biggest shareholder likely to continue
Considering the mixed reception to UK bank earnings in recent days – with shares in Barclays (BARC) jumping over 5% while NatWest (NWG) shares fell nearly 4% - investors were unsure what to expect this morning when Europe’s biggest lender by market value HSBC (HSBA) reported its results.
In the event, despite a fairly messy set of numbers, the first quarter turned out to be stronger than expected, allowing the bank to bring forward its buyback plan and rejoin the dividend list.
The shares gained 5.5% to 605p, adding more than £5 billion to the bank’s market value and returning it to the top three position in the FTSE 100 index, ahead of consumer goods giant Unilever (ULVR).
STRONG START TO THE YEAR
Pre-tax profits for the three months to March more than trebled to $12.9 billion from $4.2 billion in the same period a year ago, way above market forecasts of $8.7 billion, helped by higher interest rates and a couple of positive one-off items including a $1.5 billion paper gain on the acquisition of Silicon Valley Bank’s UK operations.
Revenue climbed 64% to $20.2 billion driven by higher net interest income across all the bank’s global businesses, although in an interview with Bloomberg chief executive Noel Quinn accepted 2023 was probably the year the contribution from rising interest rates ‘topped out’.
Adjusting for the reclassification of its French assets and a gain from buying Silicon Valley Bank UK, deposits were actually down slightly during the quarter but not enough to worry investors.
UNDER PRESSURE TO CHANGE
The firm rejoined the dividend list with a first-quarter payout of $0.10 per share, the same level as it distributed before the pandemic, and announced a $2 billion buyback.
The bank had planned to introduce the buyback in the second half, but a combination of better results and pressure from its major shareholder, Chinese insurer Ping An, to improve returns resulted in Quinn bringing it forward by six months.
‘With the good momentum we have in our business, we expect to have substantial future distribution capacity for dividends and share buy-backs’, insisted the chief executive.
LEARN MORE ABOUT HSBC
