HSBC’s Remarkable First-Half Performance: Net Profit Doubles and Share Buyback Announced



Overview

HSBC, one of the world’s largest banking institutions, has reported impressive financial results for the first half of the year. The bank’s net profit more than doubled to $18.1 billion compared to $9 billion in the same period last year. The profit before tax also soared by 147% year-on-year, reaching $21.7 billion, a remarkable increase from $8.78 billion in the first half of 2022. These strong results have led HSBC’s board to approve a second interim dividend of $0.10 per share and announce a share buyback of up to $2 billion. In this article, we delve deeper into the key highlights of HSBC’s outstanding performance.

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Highlights

  • Profit before tax: HSBC recorded a profit before tax of $21.7 billion, which marked an impressive increase of $12.9 billion compared to the same period in the previous year (1H22).
  • Revenue increase: The bank’s revenue growth was primarily driven by higher net interest income across its various business segments.
  • Share Buyback: HSBC completed a $2 billion share buyback that was announced in the first quarter of 2023. Additionally, the bank is initiating a further buyback program of up to $2 billion, with the intention to complete it within approximately three months.
  • Common Equity Tier 1 (CET1) Capital Ratio: HSBC’s CET1 capital ratio stood at 14.7%, indicating a 0.5 percentage point increase since the end of the fourth quarter of 2022 (4Q22).
  • Operating Expenses: The bank’s operating expenses for the first half of the year totaled $15.5 billion, showing a 4% decrease compared to the same period in the previous year (1H22). However, on a target basis, operating expenses increased by 4.3%.
  • Expected Credit Losses (ECL): HSBC reported expected credit losses and other credit impairment charges (ECL) amounting to $1.3 billion, representing a $0.3 billion increase.
  • Annualised Return on Average Tangible Equity (RoTE): The bank’s annualised return on average tangible equity (RoTE) reached an impressive 22.4%. Excluding the impact of the acquisition of Silicon Valley Bank UK (SVB UK) and the reversal of the French retail sale impairment, the RoTE was 18.5%.
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Net Profit Surges

In the first six months of the year, HSBC achieved a remarkable net profit of $18.1 billion, reflecting a significant spike compared to the $9 billion reported in the same period the previous year. This doubling of net profit underscores the bank’s strong financial standing and effective management during a challenging economic environment.


Profit Before Tax Soars

HSBC’s profit before tax also experienced an impressive surge, rising by 147% year-on-year to $21.7 billion. This substantial increase from the $8.78 billion recorded in the first half of 2022 highlights the bank’s ability to navigate market fluctuations and capitalize on growth opportunities.


Dividends and Share Buyback

In light of the robust financial performance, HSBC’s board has taken proactive measures to reward shareholders. The bank approved a second interim dividend of $0.10 per share, providing investors with a share in the bank’s profits. Additionally, HSBC announced a share buyback program worth up to $2 billion, aiming to enhance shareholder value and boost confidence in the bank’s future prospects.


Factors Behind the Strong Results

Several factors have contributed to HSBC’s outstanding performance in the first half of the year:

  • Reversal of Impairment and Gain on Acquisition: A significant part of the strong results can be attributed to a $2.1 billion reversal of an impairment related to the planned sale of its retail banking operations in France. Furthermore, a provisional gain of $1.5 billion from the acquisition of Silicon Valley Bank UK has bolstered the bank’s financial position.
  • Revenue Growth: HSBC’s revenue increased by an impressive 50% year-on-year, amounting to $36.9 billion in the first half. The bank attributes this growth to higher net interest income across all its global businesses due to interest rate rises.
  • Diversification of Revenue Streams: The bank’s CEO, Noel Quinn, emphasized that the strong performance is a result of revenue growth across all business lines and product areas. The bank has successfully diversified its revenue streams, not solely relying on interest rates, but also showing growth in fee income and trading income.

Optimistic Outlook and Ambitious Targets

HSBC’s leadership is optimistic about the bank’s future prospects and has set ambitious targets for the coming years. The bank forecasts a near-term return on tangible equity of 12%, an increase from the previous target of 9.9%. Moreover, the CEO projects a “mid-teens” return on tangible equity in the next two years, driven by growth in corporate banking, international wealth, and international retail banking for the affluent.

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Positive Market Reception

HSBC’s impressive financial results have been well-received by investors, as evidenced by the 1.23% rise in the bank’s Hong Kong-listed shares after the announcement. The positive market sentiment reflects confidence in the bank’s management and its ability to generate value for shareholders.

HSBC's - Revenue by global business, $bn (constant currency basis)

Conclusion

HSBC’s first-half performance is a testament to its resilience, adaptability, and strategic focus on growth. The doubling of net profit, soaring profit before tax, and shareholder-friendly measures such as dividends and share buybacks underscore the bank’s commitment to delivering value to its stakeholders. With an optimistic outlook and ambitious targets, HSBC is well-positioned to continue its growth trajectory and maintain its standing as a global leader in the banking industry.


Frequently Asked Questions (FAQs) about HSBC’s Remarkable First-Half Performance

HSBC's raises outlook as profits nearly double
Q1: What were HSBC’s financial results for the first half of the year?
  • HSBC reported a net profit of $18.1 billion in the first six months, which was more than double compared to the $9 billion achieved in the same period the previous year.
Q2: How much did HSBC’s profit before tax increase year-on-year?
  • HSBC’s profit before tax soared by 147% year-on-year, reaching $21.7 billion in the first half, up from $8.78 billion in the first half of 2022.
Q3: What contributed to HSBC’s strong financial performance?
  • Several factors contributed to HSBC’s outstanding performance, including a $2.1 billion reversal of an impairment related to the planned sale of its retail banking operations in France, and a provisional gain of $1.5 billion from the acquisition of Silicon Valley Bank UK. Additionally, revenue growth of 50% year-on-year, driven by higher net interest income across all global businesses due to interest rate rises, played a crucial role.
Q4: How did HSBC reward its shareholders for the strong results?
  • In light of the robust financial performance, HSBC’s board approved a second interim dividend of $0.10 per share, providing shareholders with a share in the bank’s profits. Furthermore, the bank announced a share buyback program worth up to $2 billion, aiming to enhance shareholder value.
Q5: What are HSBC’s future growth targets and outlook?
  • HSBC has raised its key performance target, forecasting a near-term return on tangible equity of 12%, compared to the previous target of 9.9%. The CEO also projects a “mid-teens” return on tangible equity in the next two years, with future growth expected in corporate banking, international wealth, and international retail banking for the affluent.
Q6: How did the market react to HSBC’s financial results?
  • HSBC’s impressive financial results were well-received by investors, as evidenced by the 1.23% rise in the bank’s Hong Kong-listed shares after the announcement. The positive market sentiment reflects confidence in the bank’s management and its ability to generate value for shareholders.
Q7: What strategies has HSBC implemented to achieve such strong results?
  • HSBC’s CEO attributed the strong performance to revenue growth across all business lines and product areas, showcasing a diversified revenue stream. The bank has invested in areas that will drive growth beyond the existing interest rate regime, aiming to diversify revenue sources.
Q8: What is HSBC’s dividend outlook?
  • HSBC’s CEO expressed optimism about the bank’s dividend policy, stating that if all goes according to plan this year, the dividend could surpass pre-pandemic levels. The bank has already declared two interim dividends for 2022, and the final interim dividend at the end of the year will aim to achieve a 50% payout ratio.
Q9: How does HSBC plan to sustain its growth in the future?
  • HSBC is focusing on corporate banking, international wealth, and international retail banking for the affluent as key growth areas. The bank’s strategic focus on diversifying revenue streams through investments aims to continue driving sustainable growth.
Q10: What are HSBC’s current financial targets?
  • HSBC forecasts a near-term return on tangible equity of 12% and is aiming for a “mid-teens” return on tangible equity in the next two years, indicating the bank’s ambitious performance targets.

Please note that the information provided in these FAQs is based on HSBC’s financial results and statements mentioned in the article. For the latest and most accurate information, it is recommended to refer to official announcements and reports from HSBC.

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