HSBC shares rose on Tuesday as the bank announced a fresh $3 billion share buyback scheme and posted estimate-topping third-quarter numbers.
At 727.4p per share, the FTSE 100 company was last dealing 5.1% higher on the day.
HSBC’s net interest income tumbled 17% between July and September, to $7.6 billion, although this still edged broker estimates.
The bank said the decline was “due to business disposals, higher interest expense on liabilities and a loss on the early redemption of legacy securities.”
The slump also reflected “an increase in funding costs associated with redeployment of our commercial surplus into the trading book,” HSBC said, “where the related revenue is recognised in ‘net income from financial instruments held for trading or managed on a fair value basis.'”
Revenues rose 5% year on year, to $17 billion. At constant currencies, turnover improved 7% over the period.
HSBC said this was thanks to “higher customer activity in our Wealth products in Wealth and Personal Banking, supported by volatile market conditions, and in Foreign Exchange, Equities and Global Debt Markets in Global Banking and Markets.”
Pre-tax profit improved to $8.5 billion from $7.6 billion in the same 2023 period. Profits had been expected to be roughly flat year on year.
HSBC said that “higher spend and investment in technology and the impacts of inflation” meant operating expenses rose 2%, to $8.1 billion.
The bank’s CET1 capital ratio improved to 15.2%, up 0.2% year on year.
Alongside paying a third-quarter dividend of 10 US cents per share, HSBC announced plans to repurchase a further $3 billion of its shares over the next four months.
This follows a similar level of share buybacks that completed earlier this week.
“Another Good Quarter”
Chief executive Georges Elhedery noted that “”we delivered another good quarter, which shows that our strategy is working.” He noted that “there was strong revenue growth and good performances in Wealth and Wholesale Transaction Banking.”
Elhedery commented that “HSBC is a highly connected, global business and [we plan] to increase our leadership and market share in areas where we have competitive advantage, deliver best-in-class products and service excellence to our customers, and create a simpler, more dynamic, more agile organisation with clearer lines of accountability and faster decision-making.”
A week ago HSBC announced plans to split itself into four divisions: Hong Kong, UK, Corporate and Institutional Banking, and International Wealth and Premier Banking.
It said the changes “will reduce the duplication of processes and decision making that are built into the current structure and will result in greater alignment and agility in serving our customers.”
Chinese Stimulus Boosts Performance
Describing “better-than-expected performance from the Wealth and Investment Banking units,” analyst Matt Britzman of Hargreaves Lansdown noted that “Chinese stimulus increased client activity for the wealth division, and strong trading activity in the foreign exchange, equity and debt markets helped propel investment banking fees higher.”
He commented that the new $3 billion buyback programme “speaks to the work HSBC has done in recent times to optimise the capital structure and strip out some non-core assets.”
Britzman added that “looking ahead, net interest income will come under more scrutiny as rates in the US no longer act as a tailwind, and loan growth looks to be a challenge.”