Higher interest rates have boosted profits for Europe’s biggest bank, bringing their third-quarter pre-tax total to $7.7 billion ($6.26 billion after tax).
This is up from last year’s gross profit of $3.2 billion (€3 billion), but below experts’ prediction of $8.1 billion.
The bank has announced a $3 billion share buyback that it hopes to complete by next February.
In a statement on Monday, CEO Noel Quinn said: “We’re pleased to again reward our shareholders. We have now announced three share buybacks in 2023 totaling up to $7 billion, as well as three quarterly dividends which total $0.30 per share.”
Yet despite Quinn’s optimism, the buyback announcement hasn’t dramatically sweetened investors worried about rising costs.
Due to wage inflation, technology spending, and a potential increase in bankers’ bonuses, HSBC expects its costs to go up by 5% this year, excluding the acquisition of a Silicon Valley Bank unit.
The cost prediction is above HSBC’s previous target of 3%.
The bank’s earnings report also showed a charge of $500 million that was used to cover potential losses on commercial property loans in China.
HSBC, based not just in London but also Hong Kong, is not so far removed from China’s property crisis.
Quinn has said the worst may be over for the sector, but also admitted “potential for a further deterioration in credit conditions during the last three months of the year given the continued uncertainty around liquidity support”.
Looking at HSBC’s investment bank results, we can see a more positive picture.
In the Global Banking and Markets division that houses HSBC’s investment bank, third-quarter revenues rose by 2%.
In this respect, the lender outperformed Barclays, whose investment bank recorded a 6% drop.
HSBC’s unit attracted $34 billion of net new invested assets in the quarter, and revenues have risen by 12% this year.
That said, the lender’s net interest margin, a figure that measures the difference between loan income and the money paid out on deposits, is at 1.70%.
This is down two basis points compared with the previous quarter.
According to HSBC, the decrease shows that more customers are moving their deposits to term products, particularly in Asia.