HSBC latest bank to make hay from interest rate hikes, with profits up over £3bn
HSBC’s pre-tax profits soared by more than four billion dollars (£3.2bn) in the first three months of 2023, according to a trading update from the banking group.
Revenue soared by 64 per cent to $20.2bn (£16.2bn) compared to the same period 12 months ago, the company crediting the rise to higher net interest income due to rate rises across the globe.
The rise has seen the banking group announce its first dividend of 10 cents per share since before the pandemic in 2019, as well as a share buy-back of up to two billion dollars (£1.6 billion).
Group chief executive Noel Quinn said: “Our strong first quarter performance provides further evidence that our strategy is working.
“Our profits were spread across out major geographies and all three global business performed well as we continued to meet our customers’ needs through our internationally connected franchises.
“With the good momentum we have in our business, we expect to have substantial future distribution capacity for dividends and share buy-backs.”
Pre-tax profits rose from $8.7bn (£7bn) to $12.9bn (£10.3bn) from a year ago as operating expenses fell by 7 per cent to $7.6bn (£6.1bn), primarily due to lower restructuring and related costs following the group’s cost-saving programme at the end of 2022.
HSBC and Silicon Valley Bank
In March this year HSBC UK bought Silicon Valley Bank UK Limited (SVB UK) for £1; HSBC said the results included a provisional gain of $1.5bn (£1.2bn) on the acquisition of SVB.
“We remain focused on continuing to improve our performance and maintaining tight cost discipline, but we also saw an opportunity to invest in SVB UK to accelerate our growth plans,” said Mr Quinn.
The update said the group expects net interest income of at least $34bn (£27.2bn) in 2023.
The statement said: “While the interest rate outlook remains positive, we expect continued pressure from increased migration to term deposits as interest rates rise.”
Russ Mould investment director, at AJ Bell said HSBC’s shares had risen around 15 per cent over the past year.
He said: “The US lenders and the Swiss bank that went down were badly run institutions that took too much risk, while the US lenders faced much looser regulation than their European and British equivalents. Nor were the UK banks’ shares trading as expensively relative to book, or net asset, value as their US peers, so this explains a lot of the difference, while another key factor in HSBC’s favour is the reopening of China and Hong Kong after three years of lockdowns. Both are big earners for the bank.”
Rob Freeman, Press Association