HSBC profits treble to $12.9bn on interest rate hikes

HSBC has announced its first quarterly dividend since the pandemic after profits at the start of 2023 more than tripled.

Europe’s biggest bank said on Tuesday that it would pay shareholders a 10 cents (8p) per share dividend, having last made a quarterly payout in 2019, and conduct a share buyback of up to $2billion (£1.6billion).

The FTSE 100 company revealed pre-tax earnings skyrocketed to $12.9billion between January and March, up from $4.2billion a year earlier and smashing analyst expectations of $8.6billion.

Dividend: Britain’s largest banking group announced that it would pay shareholders a 10 cents per share dividend, having last made a quarterly payout in 2019

Profit growth was driven by central banks hiking base rates in response to soaring inflation, thereby boosting HSBC’s net interest income.

Profits also received a sizeable uplift from a $1.5billion provisional gain related to the purchase of Silicon Valley Bank’s UK business after the lender abruptly collapsed in March due to the plunging value of its long-term bond portfolio.

SVB’s bankruptcy caused huge turmoil in the global financial sector, with Signature Bank failing soon afterwards and Credit Suisse needing an emergency rescue from UBS. 

Central banks helped stem the crisis and calm markets with liquidity measures, although on Monday, First Republic became the second-largest bank in US history to go under after its assets were seized by regulators.

HSBC further benefited from reversing a $2.1billion impairment on the planned sale of its retail banking operations in France due to doubts about the deal’s future.

HSBC shares were 3.8 per cent up at 595.6p just before trading closed on Tuesday, making them one of the top ten risers on the FTSE 350 Index. 

HSBC chief executive Noel Quinn said: ‘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.

‘With the good momentum we have in our business, we expect to have substantial future distribution capacity for dividends and share buybacks.’

HSBC’s results come three days prior to its annual general meeting in Birmingham, where votes on proposals to separate the bank’s Asian operations and pay higher dividends are due to happen.

Ping An Asset Management – HSBC’s largest shareholder – has accused the firm of underperformance and of ‘effectively subsidising the Western businesses’ with its Asian divisions.

It believes breaking up the bank would unlock billions in value, release $8billion in capital requirements, and reduce infrastructure and IT costs.

But the bank has steadfastly opposed the move, saying it would be too difficult to implement, damage relationships with international customers, and erode value in the company.

Richard Hunter, head of markets at Interactive Investor, said the proposed split ‘remains contrary to HSBC’s tradition of globally interconnected banking and one which it fully intends to continue to resist.

‘More broadly, the turmoil of recent months has enabled the bank to flex its financial muscles and reiterate its power.’