HSBC Reports Growth in Q3 2023 – Misses Analysts’ Expectations

HSBC Holdings, Europe’s largest bank with a market value of US$118.6 billion, reported a staggering 240% increase in pre-tax profit for the third quarter of 2023, totaling US$7.7 billion. The substantial growth, spurred by rising interest rates, has allowed a fresh US$3 billion share buyback, which is expected to be completed by February 2024. This brings the total announced buybacks for the year to US$7 billion.

Noel Quinn, Group Chief Executive, said: “We have had three consecutive quarters of strong financial performance and are on track to achieve our mid-teens return on tangible equity target for 2023. There was good broad-based growth across all businesses and geographies, supported by the interest rate environment. Our Wealth business also gained further traction, attracting $34bn of net new invested assets in the quarter and growing wealth balances by 12% compared with last year. We are pleased to again reward our shareholders. We have now announced three share buy-backs in 2023 totalling up to $7bn, as well as three quarterly dividends which total $0.30 per share. This underlines the substantial distribution capacity that we have, even as we continue to invest in growth.”

  1. Overview and Market Pressure: Despite the impressive profit surge, the results did not meet the analysts’ expectations, with the bank facing higher costs. The profit more than doubled but fell short of the US$8.1 billion average estimate from brokers. HSBC also announced a third interim dividend of 10 US cents per share, making a cumulative payout of 30 US cents per share for the year.
  2. Rising Costs and Staff Bonuses: The bank is experiencing escalating costs, projecting a 4% increase for the year, exceeding the previous goal of a 3% rise. This increase is attributed to growing technology and operating expenditures, with considerations for increasing staff bonuses in the fourth quarter.
  3. Net Interest Margin: HSBC reported a slight squeeze in its net interest margin, which dropped by 2 basis points to 1.70% in the third quarter. This decrease reflects a trend of customers transferring their deposits to term products, particularly noticeable in Asia.
  4. Impairment Charges and Economic Uncertainty: The bank took a US$500 million impairment hit related to the commercial real estate sector in mainland China, acknowledging the ongoing risks and economic uncertainties, especially in the UK and China.
  5. Comparison with Standard Chartered: Contrasting HSBC’s success, Standard Chartered, a fellow Asia-focused competitor, witnessed a one-third plunge in its third-quarter profit. This decline was mainly due to a near US$1 billion impact from exposures to China’s real estate and banking sectors.
  6. Looking Forward and Addressing Challenges: Amidst economic uncertainties and increasing costs, HSBC remains steadfast, committing to its growth strategies, shareholder rewards, and tactical investments. The bank acknowledges the pressure to deliver to its investors in the current climate of rising interest rates and is actively addressing the challenges to sustain its growth momentum.
  7. Conclusion: Despite missing analysts’ expectations, HSBC’s resilience in these challenging market conditions is evident from its robust Q3 performance, showcasing a significant profit increase mainly driven by the upswing in interest rates. To maintain this growth trajectory, vigilant risk management and strategic foresight are imperative.

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