HSBC shares rose on Tuesday after the bank announced strong underlying performance that shone through provisions related to the Madoff Ponzi scheme.
Net interest income for Q3 increased 15% to $8.8bn compared to last year, reflecting higher deposits and an 11bps jump in net interest margin to 1.57%.
“HSBC’s latest results show solid progress toward its 2027 goals, proving the bank can still deliver despite legacy headwinds, with a 14% drop in pre-tax profit linked to the Madoff Ponzi scheme,” said Max Harper, Analyst at Third Bridge.
“Revenue beat consensus expectations by 5.9%, with strength across both net interest income and fees. The $1 billion upgrade to NII guidance should be well received, reflecting how the bank’s streamlined operating model is driving greater efficiency and returns.”
HSBC’s PR strategists deserve a pat on the back after releasing the provision for the Madoff scandal yesterday and getting the bad news out of the way before announcing Q3 results that were broadly positive.
“While the Madoff-linked hit saw profit come in below expectations at a headline level, on an underlying basis the business is performing well and, crucially, somewhat better than the market was expecting,” said AJ Bell investment director Russ Mould.
“A key metric for any bank is net interest income – the difference between what the bank pays out to savers and receives from borrowers in interest – so the boost to guidance here and double-digit quarterly growth are significant.
“They back up CEO Georges Elhedery’s assertion that HSBC is becoming ‘a simple, more agile, focused bank’.
The disposal of the group’s Argentinian business was reflected in the most recent period through cost reductions. Although disposals also impacted revenue, the streamlining of the business to focus on core markets can be seen as a positive.
HSBC shares rose 2.8% on Tuesday.