HSBC first quarter pre-tax profit triples to $12.9bn

Europe's largest lender announces share buyback up to $2bn

HSBC's headquarters in Hong Kong. The bank says an improved contribution from China will offset the slowdown in the US economy. Reuters

HSBC said its first-quarter profit before tax tripled as rising interest rates around the world increased the net interest income of Europe’s biggest lender.

Pre-tax income for the three months to the end of March, rose to about $12.9 billion, from $4.14 billion in the same period in 2022, HSBC said on Tuesday.

The results beat the $8.64 billion estimate of analysts polled by Bloomberg.

First-quarter profit included a $2.1 billion reversal of an impairment relating to the planned sale of HSBC's retail banking operations in France, as the completion of the transaction has become less certain.

Results also reflect a provisional gain of $1.5 billion on the acquisition of Silicon Valley Bank UK in March after the collapse of the parent's lender in the US.

Revenue increased by 64 per cent to $20.2 billion, driven by higher net interest income in all of HSBC's businesses because of interest rate rises. It also included the gains related to the transactions in France and the UK.

Net interest income increased 38 per cent to nearly $9 billion in the first quarter from the same period a year earlier.

Customer lending balances rose by $40 billion in the quarter and customer accounts increased by $34 billion.

HSBC said its board has approved a first interim dividend of $0.10 per share and the bank announced plans to carry out up to a $2 billion share buyback.

HSBC's share price jumped 4 per cent after the earnings announcement at 11.19am UAE time. The bank's stock is up nearly 13 per cent since the start of the year.

“Our strong first-quarter performance provides further evidence that our strategy is working,” said group chief executive Noel Quinn.

“Our profits were spread across our major geographies, and all three global businesses performed well as we continued to meet our customers‘ needs through our internationally connected franchises.”

HSBC, which started a strategic shift to Asia several years ago, after scaling back its operations in the US and parts of Europe, is expected to benefit from the reopening of China's economy this year.

“A stronger China will soften but not offset the hit of slower growth in the US and Europe, the fading boost of domestic reopening after the pandemic, and higher interest rates,” S&P Global Ratings said in a research note earlier this month.

China's economy is forecast to expand 5.5 per cent in 2023 despite a global slowdown this year, while the output of the Asia-Pacific region is projected at 4.6 per cent, according to S&P estimates.

The International Monetary Fund expects China's economy to grow about by 5.2 per cent in 2023, while the global economy is forecast to expand 2.8 per cent.

“Asia-Pacific banks will be able to withstand the knock-on effects from the recent stress in the US regional bank sector or from Europe after the recent takeover of Credit Suisse,” S&P said.

“We remain cautious, however, as previous banking crises indicate that the effects of banking sector contagion can take some time to fully play out.”

While Mr Quinn said HSBC remained focused on improving performance and controlling costs, he also said there was an opportunity to invest in SVB UK to accelerate the bank's growth plans.

“For 158 years, HSBC has banked the entrepreneurs who have created today’s industrial base,” he said.

“With the SVB UK acquisition, we have access to more of the entrepreneurs in the technology and life sciences sectors who will create the businesses of tomorrow. We believe they‘re a natural fit for HSBC, and that we‘re uniquely placed to take them global.”

HSBC's acquisition of SVB UK, and the related investments internationally, are expected to add about 1 per cent to the group‘s operating expenses.

The bank said rising interest rates will buttress its net interest income and it expects to achieve a net interest income of at least $34 billion in 2023.

“While the interest rate outlook remains positive, we expect continued pressure from increased migration to term deposits as interest rates rise,” it said.