HSBC's third-quarter profit before tax more than doubled as rising interest rates around the world boosted the profitability of Europe’s biggest lender, which announced plans for a share buy-back programme of up to $3 billion.
Pre-tax income for the three months to the end of September rose to $7.7 billion, up from $3.2 billion in the same quarter of 2022, HSBC said on Monday.
The results missed the $8.1 billion mean average estimate of analysts polled by the bank.
Third-quarter profit also 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.
Revenue increased by 40 per cent to $16.2 billion, driven by higher interest rates that boosted net interest income in all of its global businesses and as non-interest income also increased.
“We have had three consecutive quarters of strong financial performance,” said HSBC group chief executive Noel Quinn.
“There was good broad-based growth across all businesses and geographies, supported by the interest rate environment.”
HSBC's net interest income rose 16 per cent year-on-year in the third quarter to $9.2 billion, due to higher interest rates globally.
HSBC's net interest margin of 1.70 per cent increased from 1.51 per cent in the third quarter of 2022, but decreased marginally from 1.72 in the previous quarter, mainly reflecting an increase in customers migrating their deposits to term products, particularly in Asia.
The US Federal Reserve has raised interest rates 11 consecutive times to its current range of 5.25 per cent to 5.5 per cent to rein in price increases without driving the economy into a recession. Analysts expect the Fed, which will meet on October 31 and November 1, to hold interest rates steady.
HSBC's non-interest income rose on a constant currency basis by 93 per cent to $6.9 billion, mainly due to the non-recurrence of the impairment relating to the sale of its retail banking operations in France.
New flows into the lender's wealth business "gained further traction", attracting $34 billion of net new invested assets during the third quarter and growing its wealth balances by 12 per cent year-on-year, Mr Quinn said.
Operating expenses climbed 2 per cent from the third quarter of 2022 to $800 million. This increase was mainly because of higher technology costs, the impact of rising inflation and an increase in performance-related pay accrual, the bank said.
The increases were partly offset by lower restructuring and other related costs following the bank's completion of a cost-saving programme at the end of 2022.
The bank's expected credit losses (ECL) and other credit impairment charges of $1.1 billion, which were broadly in line with the third quarter of 2022, also included a $500 million charge relating to the commercial property sector in mainland China.
Sputtering growth in China and an unfolding property-sector meltdown have posed a challenge to many businesses seeking to expand in the world’s second-largest economy.
"We continue to monitor risks related to our exposures in mainland China’s commercial real estate sector closely and there remains a degree of uncertainty in the forward economic outlook, particularly in the UK," the bank said.
Over the medium to long term, it will use a range of 30 to 40 basis points of average gross loans for planning its ECL charges.
Customer lending at the end of the third quarter reached $936 million, broadly stable from $940 million in the second quarter of 2023, amid softer corporate loan demand in Hong Kong, it said.
Customer deposits stood at $1.56 billion in the third quarter, little changed from the second quarter.
Customer accounts in the third quarter fell by $3 billion compared with the second quarter of this year, primarily in HSBC UK, reflecting higher cost of living and competitive pressures.
HSBC distributed its third interim dividend payment this year of 10 cents per share, bringing the total payout this year to 30 cents per share.
"We have now announced three share buy-backs in 2023 totalling up to $7 billion, 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," Mr Quinn said.
The company's plans for a share buy-back of up to $3 billion is expected to begin shortly and to be completed by its 2023 full-year results announcement on February 21, 2024, it said.
Looking ahead, HSBC said it remains committed to a return on tangible equity (RoTE) target, a key measure of a bank's performance, of "mid-teens" for 2023 and 2024.
It expects net interest income in 2023 to be above $35 billion.