Business Essentials for Professionals


HSBC Reports A $3 Billion Share Repurchase And An Increase In After-Tax Profit Of Approximately 235% Y-O-Y

HSBC Reports A $3 Billion Share Repurchase And An Increase In After-Tax Profit Of Approximately 235% Y-O-Y
For the three months ended in September, HSBC's profit after tax was $6.26 billion, a 235% increase over the $2.66 billion it made in the same time the previous year. The largest bank in Europe in terms of assets witnessed a $4.5 billion increase in profit before taxes to $7.7 billion for the quarter, primarily as a result of higher interest rates.
Economists had projected a third-quarter profit after tax of $6.42 billion and a profit before tax of $8.1 billion, thus the results fell short of their forecasts. According to HSBC, a $2.3 billion impairment related to the company's intended sale of its retail banking business in France was a contributing factor in the increase in the third quarter of 2022.
In the first quarter of 2023, $2.1 billion of that was reversed as the likelihood of the transaction closing decreased.
“We now expect to reclassify these operations to held for sale in 4Q23, at which point the impairment would be reinstated,” it said.
In the third quarter, revenue increased to $7.71 billion from $3.23 billion in the same period last year. Additionally, HSBC linked this to the current climate of increased interest rates, stating that it has encouraged growth in net interest income across all of its international operations.
A gauge of the profitability of loans, net interest margin, was 1.7% at the end of the year, up 19 basis points from the previous year and above predictions of 1.68%.
On the other hand, NIM decreased by two basis points from the prior quarter. According to HSBC, this was due to a rise in consumers moving their deposits to term products, especially in Asia.
Profit after taxes for the nine months ending in September was $24.33 billion, as opposed to $11.59 billion for the same period in 2022.
Following the announcement, HSBC's Hong Kong-listed shares increased by 0.43%.
The bank's board decided to approve a third interim dividend of 10 cents per share in light of the performance. In addition, HSBC announced that it will start a $3 billion additional share buyback, which is anticipated to “commence shortly” and be finished by the company's full-year results report on February 21, 2024.
“We’re pleased to again reward our shareholders. We have now announced three share buybacks in 2023 totaling up to $7 billion, as well as three quarterly dividends which total $0.30 per share,” group CEO Noel Quinn said in the release. “This underlines the substantial distribution capacity that we have, even as we continue to invest in growth.”
The bank stated that the buyback is anticipated to affect its common equity tier 1 capital ratio, or CET1 ratio, by 0.4 percentage points. The financial robustness of European banks is gauged by the CET1 ratio.
HSBC stated that going forward, it intends to lower its CET1 ratio from its present level of 14.9% to between 14% and 14.5%. Excluding substantial notable factors, it said that its dividend payout ratio for 2023 and 2024 is 50%.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc