HSBC’s Q1 2023 profits tripled to $12.9bn as the reversal of impairments, the SVB UK acquisition, and higher interest rates helped lift earnings.
HSBC shares were 5.2% higher at the time of writing.
Higher interest rates helped revenue surge to $20.2bn – a 64% increase compared to Q1 2022. HSBC said they enjoyed higher net interest margins (NIM) across the entirety of their global business as group NIM rose 50 bps year-on-year to 1.69%.
This is a substantial increase in the top line and represents material progress at the global bank so much so HSBC has reinstated their quarterly dividend of 10 cents and will conduct a $2bn share buyback.
“HSBC has seen profits soar, and investors should be reasonably happy with the restored quarterly dividend and $2bn buyback that looks likely to be completed over the next quarter,” said Matt Britzman, equity analyst at Hargreaves Lansdown.
The bumper increase in net interest income was further compounded by non-trading additions to profit before tax. The acquisition of SVB UK has added an instant $1.5bn to HSBC’s profit before tax, and the reversal of a $2.1bn impairment of their French retail unit rounded off a superb quarter in terms of profitability.
Britzman continued to explain the impact of SVB UK and strategic progress with divesting weaker business units.
“There’s a fair amount to unpick in these results, with a few elements flattering performance figures. Higher rates in France mean the sale of HSBC’s French retail business is looking less likely, and impairment charges relating to the sale have been reversed for now. That provided a boost to profit, but this isn’t the best news in the long run,” Britzman said.
“Getting rid of underperforming businesses to increase focus on higher growth areas like Asia is key to the strategy. It’s positive to hear the Canadian sale is progressing, that’ll provide a capital boost to what’s already a strong balance sheet and should add further options to either expand in higher growth areas or appease investors with further distributions.”
SVB UK
The provisional gain of $1.5bn on the acquisition of Silicon Valley Bank UK Limited will please investors as the risk of taking on troubled assets seems to have been a big win for the bank, which has further grown its long-term asset base through the deal.
“This deal may prove something of a steal for HSBC,” said AJ Bell investment director Russ Mould.