HSBC launches $4 billion share buyback as Q3 profit misses forecasts
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Europe’s largest bank posted a pre-tax profit of US$7.7 billion for the July to September quarter, versus US$3.2 billion a year earlier.
PHOTO: AFP
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HONG KONG/LONDON – HSBC on Monday reported a fresh US$3 billion (S$4 billion) share buyback and a more than doubling of third-quarter profit that nonetheless missed forecasts as spending on technology and operations grew and inflation pushed wage expectations higher.
The results from Europe’s biggest bank showed the pressure it is under to deliver returns to long-suffering investors now that interest rates worldwide are rising.
HSBC indicated costs are likely to increase by up to 5 per cent in 2023 excluding an acquisition, more than its previous goal of a 3 per cent rise, as technology and operating spending grow, and it considers a boost to staff bonuses in the fourth quarter.
The bank posted a pre-tax profit of US$7.7 billion for the July to September quarter, versus US$3.2 billion a year earlier, but the result trailed the US$8.1 billion mean average estimate of brokers compiled by HSBC.
HSBC’s profit was below expectations and “costs are likely to be the area of controversy”, said Jefferies analyst Joe Dickerson, though he added the share buyback was US$1 billion larger than his forecast.
The London-headquartered bank with a market value of US$118.6 billion said it aimed to complete the share buyback by February 2024, lifting the total buybacks announced this year to US$7 billion.
It also dished out the third interim dividend payout in 2023 of 10 US cents per share, bringing the total payout in 2023 to 30 US cents per share.
The bank’s Hong Kong-listed shares were down 0.26 per cent after the earnings release, narrowing losses from 2.1 per cent in the morning and outperforming the market’s wider financial index, which fell 1.21 per cent.
HSBC’s third-quarter revenues rose 2 per cent in the Global Banking and Markets division that houses its investment bank, a more robust performance than rival Barclays’ 6 per cent drop, as HSBC’s large payments business benefited from higher interest rates.
New flows into its wealth business gained traction, with US$34 billion of net new invested assets in the quarter and its wealth balance sheet growing by 12 per cent compared with 2022.
The lender’s net interest margin of 1.7 per cent was squeezed by 2 basis points compared with the prior quarter, reflecting an increase in customers migrating their deposits to term products, particularly in Asia.
In the third-quarter results, the lender booked a US$500 million impairment related to the commercial real estate sector in mainland China.
“We continue to monitor risks related to our exposures in mainland China’s commercial real estate sector closely, and there remains a degree of uncertainty in the forward economic outlook, particularly in Britain,” the company said in the results statement.
HSBC’s Asia-focused competitor Standard Chartered reported last week an unexpected one-third plunge in third-quarter profit
REUTERS
