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HSBC announced a $3bn share buyback as the bank’s profits far exceeded analysts’ expectations, in its final set of earnings under chief executive Noel Quinn.
Reported pre-tax profits at the UK-based institution increased to $8.9bn, from $8.8bn a year earlier, beating analysts’ expectations of $7.8bn.
Quinn, who has led the bank for five years, will be replaced in September by Georges Elhedery, its chief financial officer. The bank said on Wednesday that its financial controller Jon Bingham would fill in as interim chief financial officer.
“I have always been immensely proud of the heritage of this bank and the strategic role it plays in the world,” Quinn said on Wednesday. He said he was “confident that we have the right strategy and model to increase revenue, even in a lower interest rate environment”.
The $3bn buyback is the latest in a series of benefits for HSBC shareholders in recent years, including multiple rounds of share buybacks and a rising dividend. On Wednesday, it announced an interim dividend of 10 cents a share.
But Quinn’s comments on interest rates underscore the challenges his successor Elhedery will face in the role. During Quinn’s leadership, the bank has been a big beneficiary of rising rates. That benefit is beginning to tail off as central banks bring inflation under control.
HSBC’s net interest income fell by $1.4bn in the first half of this year to $16.9bn, and the bank’s net interest margin, a key measure of how profitable its lending is, fell to 1.62 per cent from 1.7 per cent a year earlier. More than half of HSBC’s $66bn in revenue last year came from net interest income.
Higher rates boost banks by widening the gap between what they can charge borrowers and how much they have to pay for funding.
HSBC said its wealth business — including life insurance and private banking — was a “key driver” of its revenue growth, adding that profits had risen in its “home markets” of Hong Kong and the UK.
The bank’s return on tangible equity, a measure of profitability, was 21.4 per cent for the first half of the year, down from 22.4 per cent a year earlier.
It reported expenses of $8.1bn in the second quarter, up 3 per cent from a year earlier, which it said was partly due to higher technology costs and inflation.
Elhedery’s main tasks when he takes the top job will include reining in costs, boosting growth in less rate-sensitive businesses and navigating a complex geopolitical situation as US-China tensions continue.
The bank is based in the UK, but Hong Kong is by far the biggest single source of its revenues, and it depends on the US for its crucial dollar clearing licence.
Bingham will act as chief financial officer on an interim basis from September, in addition to his current role, the bank said. He joined HSBC in 2020 and previously worked at KPMG for two decades. Elhedery said Bingham had “outstanding technical accounting and regulatory knowledge and expertise”.
Rival Standard Chartered on Tuesday announced a $1.5bn share buyback, its biggest ever, after its wealth management business boosted profits.