On Tuesday, HSBC continued the trend of strong FTSE 100 banking earnings by posting Q3 results that exceeded analyst expectations.
After years of slow activity following the pandemic, investors will be delighted to see HSBC enjoy the impact of Chinese stimulus.
Adjusted profit before tax came in at $8.7bn, significantly higher than the $7.7bn expected by investors.
The bank’s diversification of operations helped propel earnings higher. Wealth management and markets activities played a major part in increasing income. Unlike other FTSE 100 banks, HSBC isn’t reliant on traditional lending and deposits to generate income, and it’s certainly not reliant on the UK.
HSBC’s net interest income did fall during the period, but the depth of the company’s operations and geographical diversification shone through.
Uncertainty around China’s economic health has raised questions about financial services in the country and has been the source of disappointment in prior earnings updates.
It is a very different story this time around. Chinese stimulus is driving demand for wealth management products, and HSBC has reduced charges to their Chinese real estate business. The Chinese property sector has been a significant concern for investors, who will be glad to see some signs of stabilisation.
The upbeat report sent HSBC shares higher in Hong Kong overnight and the sentiment followed through to trade in London where shares were 3.5% higher at the time of writing.
“Chinese stimulus increased client activity for the wealth division, and strong trading activity in the foreign exchange, equity and debt markets helped propel investment banking fees higher – akin to what we saw with the major US banks,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“The new buyback, while expected, will still be taken as a positive and speaks to the work HSBC has done in recent times to optimise the capital structure and strip out some non-core assets. Looking ahead, net interest income will come under more scrutiny as rates in the US no longer act as a tailwind, and loan growth looks to be a challenge.”