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HSBC Profits: 235% Profit Surge & $3B Share Buyback

HSBC Profits: 235% Profit Surge & $3B Share Buyback

HSBC has disclosed its financial results for the third quarter, reporting a profit after tax of $6.26 billion. This figure represents a substantial increase of 235% compared to the same period in the previous year. As Europe’s largest bank by assets, HSBC also witnessed a noteworthy upswing in profit before tax for the quarter. Surging by $4.5 billion to reach $7.7 billion. This notable growth attributes to the prevailing higher interest rate environment.

Nevertheless, it is important to note that HSBC Profits results fell short of the expectations set by economists. The consensus among economists was a third-quarter profit after tax of $6.42 billion. Also a profit before tax of $8.1 billion. HSBC has provided insights into the factors contributing to this discrepancy. Citing a $2.3 billion impairment recorded in the third quarter of 2022, linked to the planned sale of its retail banking operations in France. Notably, $2.1 billion of this impairment was subsequently reversed in the first quarter of 2023. That was due to increased uncertainty surrounding the completion of the transaction.

HSBC profits in Q3 2023: Financial Performance and Strategic Reclassification

HSBC has announced its intention to reclassify these operations as “held for sale” in the fourth quarter of 2023. At which point the impairment would be reinstated. The institution has reported a rise in revenue to $7.71 billion for the third quarter. As a substantial increase from $3.23 billion in the same period of the previous year. This increase attributes to the favorable impact of the higher interest rate environment on net interest income across its global business segments.

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The net interest margin, a key metric for measuring lending profitability, has increased to 1.7%, exceeding expectations set at 1.68%. However, it experienced a minor decline of two basis points compared to the previous quarter, primarily due to customers shifting their deposits to term products, with a particular concentration in the Asian market.

HSBC’s Robust 9-Month Performance and Shareholder Initiatives

For the nine months ending in September, HSBC Profits scoured after tax of $24.33 billion. A notable increase compared to the $11.59 billion achieved in the first nine months of the previous year. In light of these results, HSBC’s board has approved a third interim dividend of 10 cents per share. Additionally, the bank has announced a forthcoming share buyback program of up to $3 billion. Expected to commence shortly and conclude by its full-year results announcement on February 21, 2024.

Group CEO Noel Quinn expressed his satisfaction with these developments, emphasizing the bank’s commitment to rewarding its shareholders and highlighting its capacity to continue investing in growth while simultaneously returning value to its investors.

It is important to mention that the proposed buyback is anticipated to have a 0.4 percentage point impact on its common equity tier 1 capital ratio (CET1 ratio), which stands as a critical measure of financial resilience for European banks. Looking ahead, HSBC has detailed its plans to reduce its CET1 ratio to a range between 14% and 14.5%, as compared to the current level of 14.9%. Furthermore, the bank has disclosed a dividend payout ratio of 50% for the years 2023 and 2024, excluding significant exceptional items.

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Please note that this article serves solely for informational purposes. As such, it is not financial advice. We strongly advise readers to conduct thorough research and consult with financial professionals before making any investment decisions.


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