HSBC restarts buybacks after rates and wealth boost H1 profit
HSBC's First-Half 2023 Financial Performance and Strategic Moves
By Selena Li and Lawrence White
Strong Profit Growth Surpasses Expectations
HONG KONG/LONDON, Aug 4 (Reuters) - HSBC Holdings reported a better-than-expected first-half profit and raised its net interest income target, driven by revenue growth in lending and wealth management fee earnings on robust money flows.
Europe's largest bank posted a pretax profit of $19.5 billion for the first six months of this year, up 23% from $15.8 billion a year earlier and ahead of the $18.9 billion that analysts forecast.
Asian Focus and Market Overhaul Drive Results
HSBC's solid performance reflects the payoff of its Asian focus, where an overhaul targeting wealth and cross-border banking drove fee income growth alongside a favourable rate backdrop.
It also caps a strong earnings season for Europe's big banks, which have extended a more than two-year-long recovery thanks to a surge in trading activity and resilient interest income despite dips in central bank rates.
Upgraded Guidance and Shareholder Returns
HSBC lifted its guidance for net interest income for this year, saying it now expects to exceed $46 billion, having previously said it would hit that level.
Resumption of Share Buybacks and Dividend Update
The lender announced a resumption of its share buybacks with an up to $1 billion plan, after pausing them when it announced late last year it was taking smaller Hong Kong lender Hang Seng Bank private.
HSBC also set a second interim dividend of $0.1 per share, following a $0.1 payout in May.
Market Reaction and Analyst Commentary
The bank's Hong Kong-listed shares were flat in Tuesday afternoon trading, dropping from a record high of HK$169.5 after the earnings release.
Citi analysts said in a note the new buyback of $1 billion was below the consensus of $2.2 billion, raising questions about whether HSBC is "transitioning to lower quarterly buybacks, or is this quarter's re-launch a stepping stone?"
Strategic Streamlining and Wealth Growth
The half-year update from HSBC showed CEO Georges Elhedery continuing his strategy of streamlining the lender by exiting markets where it lacks scale, as the bank sold its Singaporean insurance, Egyptian retail banking and Australian mortgage businesses.
Wealth revenue in the first half grew 18% from a year ago, backed by strong growth from its Asian markets.
Competitive Landscape and Regulatory Environment
Rival Standard Chartered also announced a forecast-beating first-half profit last week, powered by a push for fee income.
Despite a wealth crackdown Beijing launched in late May aimed at restricting illegal cross-border flows, account-opening activity had remained largely unaffected, Elhedery said in an earnings briefing.
"Hong Kong remains front and centre in the growth of our wealth business in Asia," he added.
Client Acquisition and Cross-Border Banking
It is evidenced by the 640,000 new clients the banking group acquired in the first six months in the market across HSBC and Hang Seng brands.
The corporate and institutional banking business received a further boost from the rising need to serve cross-border clients. It has become the bank's biggest income earner, accounting for a third of the first-half profit.
IPO Pipeline and Future Outlook
The bank, which is no longer active in the most buoyant U.S. dealmaking market after earlier exits, has more than 70 initial public offerings lined up in Asia, 40 of which are in Hong Kong, according to Elhedery.
(Reporting by Selena Li in Hong Kong and Lawrence White in London; Editing by Muralikumar Anantharaman)
