Aaron P | Bauer Griffin | GC Images | Getty Images
LONDON — Europe’s largest lender HSBC announced a share buyback program of as much as $3 billion on Wednesday as first-half pretax profit beat expectations amid a high-interest rate environment.
The bank reported pretax profit of $21.56 billion within the six months to June, down from $21.66 billion in the identical period last 12 months. The half-year profit was still well above the typical of broker estimates compiled by HSBC of $20.5 billion, in line with Reuters.
HSBC’s London-listed shares rose 2.08 percent at 8:02 a.m. London time, immediately after local markets opened, while its Hong Kong-listed shares rose about 2.8 percent.
“We are growing and investing in our international retail and wealth management businesses, which helps us diversify our earnings,” HSBC’s outgoing chief executive, Noel Quinn, said on Wednesday.
“Each of these strengths contributed to good revenue performance in the first half of 2024, supported by higher interest rates.”
The bank’s revenue rose 1.1 percent year-on-year to $37.3 billion. HSBC attributed this development to the “impact of higher consumer activity in our wealth products in Wealth and Personal Banking (‘WPB’) and in equity and securities financing in Global Banking and Markets (‘GBM’).”
The lender’s wealth management revenues rose 12% to $4.3 billion within the six months to June, with significant growth in investment distribution, asset management and life insurance.
The bank outlined its priorities of diversifying its revenues and maintaining a firm position in its “critical” home markets of Hong Kong and the UK. It reported 345,000 recent customers opening accounts in the previous region in the primary half of the 12 months, while the variety of international customers within the UK rose 8% to 2.7 million over the identical period.
The bank also approved a second interim dividend of $0.10 per share and announced a share buyback of as much as $3 billion, which it said it hopes to finish inside three months.
“That brings our total distribution to shareholders in 18 months to over $34 billion,” HSBC’s Quinn told CNBC on Wednesday. “And I think the standout achievement is our ability to continue to grow revenue from sources other than interest income.”
HSBC’s common equity tier 1 (CET1) ratio – a measure of a bank’s solvency – rose to fifteen.0 percent, up 0.2 percentage points from the fourth quarter of last 12 months and above the bank’s medium-term goal range of 14-14.5 percent for this metric.
The bank also announced a return on average tangible equity (a measure of profit efficiency) of 17.0% for the January-June period excluding significant items, down from 18.5% in the identical period last 12 months. HSBC announced a brand new forecast of “mid-double-digit return on average tangible equity in 2025,” consistent with its 2024 forecast.
“The strong performance of the business gives us confidence to continue to deliver mid-double-digit returns in 2025,” Quinn told CNBC. Turning to the broader outlook, he touched on the bank’s performance within the UK, saying: “I think there are some encouraging signs there of future economic growth and there is certainly a strong, robust economy at the moment.”
In a note, Jefferies analysts called the brand new ROTE outlook “encouraging,” adding that it “appears comfortably above the consensus of around 12%.”
“After strong performance in 2023, we believe the bank’s earnings momentum has come to an end,” Benjamin Toms, analyst at RBC Capital Markets, said in a note Wednesday, noting that falling rates of interest are expected in HSBC’s core regions this 12 months and next.
“These headwinds are partially offset by hedging activities and balance sheet growth, but this growth is unlikely to be remarkable. HSBC has shown decent cost control since 2020, although disclosure makes tracking difficult,” Toms added.
— CNBC’s Ganesh Rao contributed to this report.
