HSBC stormed higher on Wednesday after announcing a blowout $4.8bn share buyback programme amid rising profits.
The bank reported a profit before tax of $21.6 billion for the half-year period and Q2 profit before tax of $8.9 billion smashed expectations of $7.8 billion.
HSBC shares were 4.1% higher at the time of writing.
The bank’s revenue saw a modest increase of 1%, rising to $37.3 billion. This growth was partially attributed to gains from strategic transactions, including the disposal of its Canadian banking business, which resulted in a $4.8 billion gain. However, these positive results were somewhat offset by an impairment of $1.2 billion related to the classification of its Argentine business as held for sale.
The bank’s performance was bolstered by increased customer activity in Wealth products within its Wealth and Personal Banking division, as well as in Equities and Securities Financing in Global Banking and Markets.
“HSBC delivers a massive profit beat as Noel Quinn says goodbye. The beat was split evenly across strength in underlying profitability and lower impairments. Borrowers are clinging on, even improving in some places, despite interest rates that many haven’t had to handle for quite some year, or ever in the case of younger borrowers. The outlook on loan losses is decent too, with management signalling the worst of the Chinese commercial real estate drama now in the rear-view mirror,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“A greater focus on Wealth Management is bearing fruit and should allow HSBC to take advantage of the burgeoning middle class in regions like China. There’s also the added bonus of diversification away from interest rates, a key strategic priority over the past few years. With rate cuts expected around the globe, these actions should give Georges Elhedery a strong foundation to work from when he steps up to the CEO seat in September.”
HSBC’s net interest margin (NIM) decreased by 8 basis points to 1.62% compared to the first half of 2023, reflecting the higher cost of interest on liabilities which weren’t covered by interest income. This, however, was much better than analysts thought going into earnings.
HSBC expects banking net interest income to reach around $43 billion in 2024, although this guidance remains dependent on global interest rate trends.
CEO Noel Quinn is to step down but ensured he left with a bang by announcing a $4.8 billion share buyback programme.
“After delivering record profits in 2023, we had another strong profit performance in the first half of 2024, which is further evidence that our strategy is working.” said Noel Quinn Group Chief Executive.
“Our investment in Wealth is delivering higher, more diversified revenue and we continue to grow our core international and scale businesses, all of which helped us to provide $13.7bn of distributions in respect of the first half. We are confident that we have the right strategy and model to grow revenue, even in a lower interest rate environment, and are therefore providing new guidance of a mid-teens return on average tangible equity in 2025.
I have always been immensely proud of the heritage of this bank and the strategic role it plays in the world. My aim when I took this job was to deliver financial performance to match our standing. Working together, I believe we have done that and created a strong platform for growth.”