HSBC Holdings, Europe’s largest bank, reported exceptional financial performance in the first half of 2023, prompting the announcement of a fresh $2 billion share buyback. Driven by the positive impact of increasing central bank interest rates globally, the bank’s income more than doubled, boosting investor confidence.
In response to the impressive growth, HSBC Holdings raised its near-term return on tangible equity goal to at least mid-teens for 2023 and 2024, surpassing its previous target of at least 12% from 2023 onwards. The bank’s solid return on tangible equity of 9.9% for 2022 now appears to be overshadowed by its upward trajectory.
HSBC’s investment bank reported a comparatively modest performance, with income rising by 16%. However, the commercial banking and wealth divisions outshone the investment bank, experiencing gains of nearly 40%. This reflects the favorable environment created by rising interest rates worldwide, which have significantly boosted lending income.
The bank has adjusted its net interest income forecast for this year to $35 billion, a notable increase from the initial estimate of $34 billion. Despite this positive adjustment, some analysts had anticipated a more substantial upgrade closer to $36 billion.
Following the release of the financial results, HSBC’s shares surged in both Hong Kong and London. In Hong Kong, the shares reached HK$66.70 ($8.55), their highest value since May 2019, before stabilizing at a 1.2% increase by 0625 GMT. Similarly, in London, the shares rose by 2% in early trading, surpassing the flat FTSE 100 benchmark index.
For the first half of 2023, HSBC posted a pretax profit of $21.7 billion, a remarkable increase from the $9.2 billion recorded in the same period last year. The bank’s performance also exceeded analysts’ average forecast of $20.9 billion, contributing to positive investor sentiment.
As a testament to its strong performance, HSBC declared an interim dividend of 10 cents per share. However, CEO Noel Quinn remains cautious about the future, predicting tougher times ahead due to the upcoming roll-off of fixed-term deals for mortgage customers and expectations of further rate rises.
The bank’s credit losses for the first six months amounted to $1.3 billion, compared to $1.1 billion during the same period the previous year. The higher credit loss resulted partly from exposure to the China commercial real estate sector and the UK commercial banking.
HSBC’s robust performance in H1 2023 showcases its resilience and ability to navigate challenges, instilling confidence in investors and positioning the bank for continued growth in the global financial landscape.