In this photo taken on Aug 3, 2020, a HSBC logo is pictured on a wall outside a branch of the bank in central London. (PHOTO / AFP)
Hong Kong’s largest note-issuing bank HSBC on Tuesday raised its earnings outlook and unveiled a $2 billion share buyback, after global rate rises helped it double its net profit in the first six months of the year.
The UK-based lender reported a net profit of $18.1 billion for the first half of 2023, compared to $9 billion in the same period a year earlier.
Meanwhile, revenue rose by 50 percent year-on-year to $36.9 billion.
“Our strong first half featured good broad-based profit generation around the world. There was also higher revenue in our global businesses driven by strong net interest income, supported by continued tight cost control,” HSBC Chief Executive Noel Quinn said.
In light of the strong results, HSBC said it would repurchase a further $2 billion in shares, adding to the buyback program of the same amount announced three months ago. The board also approved an interim dividend of 10 cents per share
In light of the strong results, HSBC said it would repurchase a further $2 billion in shares, adding to the buyback program of the same amount announced three months ago. The board also approved an interim dividend of 10 cents per share.
Banks generate profits from the difference between the interest they pay out to savers and the rates they receive from making loans. HSBC is the latest lender to ride on interest rate hikes worldwide, following its rival Standard Chartered’s better than expected results released last week.
Net interest margin — a benchmark used for lending profitability — rose to 1.72 percent in the second quarter from 1.69 percent in the first three months of 2023.
HSBC said it is now expecting net interest income this year to be above $35 billion instead of $34 billion.
“Our strong performance in the first half of 2023 and our continued strategic progress mean that we now expect to achieve a return on tangible equity in the mid-teens for 2023 and 2024,” Quinn said. The earlier target was 12 percent.
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The results’ announcement sent HSBC’s share price in Hong Kong to a four-year high of HK$66.30 ($8.50) on Tuesday.
Given the rising net interest income and the fresh share buyback, Morgan Stanley overweighted the bank, raising its price target from HK$67.50 to HK$72.20.
Also, Citigroup said in its research note that HSBC’s fresh buyback was encouraging and that the latest results painted a rosy outlook. The investment bank reiterated a buy rating on the company’s stock.
Nevertheless, the uncertain external environment remains the biggest headwind to the company’s business, says Linus Yip, chief strategist at First Shanghai Securities.
“The company has been outperforming the market this year. There’s still a little upward momentum, but it won’t be too much,” Yip said.
