HSBC, Europe’s largest bank by assets, has announced a profit after tax of $6.26 billion for the third quarter of 2023, marking a significant 235% increase compared to the $2.66 billion it reported in the same period the previous year. The bank also saw its profit before tax for the quarter rise by $4.5 billion to reach $7.7 billion. These impressive figures were largely attributed to a favorable interest rate environment. However, the reported numbers fell short of expectations among economists, who had forecasted a Q3 profit after tax of $6.42 billion and profit before tax of $8.1 billion.
The bank explained that part of the profit increase could be traced back to a $2.3 billion impairment recorded in the third quarter of 2022, relating to the planned sale of its retail banking operations in France. By the first quarter of 2023, $2.1 billion of this impairment had been reversed as the completion of the transaction became less certain. HSBC indicated that it now expects to reclassify these operations as “held for sale” in the fourth quarter of 2023, at which point the impairment will be reinstated.
In the third quarter, HSBC’s revenue climbed to $7.71 billion, up significantly from $3.23 billion in the previous year, with the bank attributing this rise to the improved interest rate environment. This environment supported growth in net interest income across all of HSBC’s global businesses. Notably, the bank’s net interest margin (NIM), a key measure of lending profitability, was 1.7%, an increase of 19 basis points year-on-year, surpassing estimates of 1.68%. However, the NIM did dip by two basis points compared to the previous quarter due to customers shifting their deposits to term products, especially in Asia.
For the first nine months of 2023, HSBC reported a profit after tax of $24.33 billion, compared to $11.59 billion in the same period of 2022. As a result of these strong results, HSBC’s board approved a third interim dividend of 10 cents per share. Additionally, the bank will initiate a share buyback program of up to $3 billion, expected to commence shortly and be completed by the full-year results announcement on February 21, 2024.
Group CEO Noel Quinn expressed the bank’s commitment to rewarding shareholders and mentioned that this marks the third share buyback of 2023, totaling up to $7 billion, along with three quarterly dividends totaling $0.30 per share. HSBC’s future plans include reducing its common equity tier 1 capital ratio (CET1 ratio), a measure of financial resilience, to between 14% to 14.5%, down from its current level of 14.9%. The bank also disclosed that its dividend payout ratio for 2023 and 2024 is set at 50%, excluding material notable items.