In line with predictions, HSBC Holdings (HSBA.L) stated on Tuesday that its quarterly earnings tripled as rising interest rates throughout the world increased the lender's revenue and enabled it to issue its first quarterly dividend since 2019.
Even though aggressive policy tightening has caused turmoil in the banking sector, primarily in the US, the strong results of HSBC and its Asian competitor DBS (DBSM.SI) highlight the boost to their balance sheets from this tightening.
The greatest US bank failure since the 2008 financial crisis was resolved on Monday as regulators seized First Republic Bank (FRC.N) and sold its assets to JPMorgan Chase & Co (JPM.N), putting an end to the lingering banking instability.
The difficulty for companies like HSBC and DBS would be to maintain their margins in the upcoming quarters as the rate cycle approaches its peak.
The biggest bank in Europe reported a pretax profit of $12.9 billion for the first quarter that ended in March, up from $4.2 billion in the same period last year. Results exceeded HSBC's $8.64 billion average expectation based on 17 analysts.
In afternoon trading, HSBC shares in Hong Kong extended early gains and increased by more than 3%.
The proposed sale of HSBC's French business had a $2 billion impairment that was reversed, reflecting the possibility that the deal would not proceed.
It had issued a warning last month that the buyer's regulatory capital issues may put its France disposal in risk.
The London-based bank also disclosed a delay in the timeline for the completion of the sale of its Canadian operations, a crucial component of its strategy to reduce its presence in Western markets with poor growth because it lacks scale.
The $10 billion sale that was previously expected to close by the end of this year will now probably only occur in the first quarter of 2024, according to the bank.
In an effort to fend off calls from its largest shareholder Ping An Insurance Group Co of China (601318.SS) to spin off the Asia unit in order to increase shareholder returns, HSBC has recently pushed to speed its shift to Asian markets.
Following requests from shareholders to raise the dividend payout, it declared a $0.10 per share dividend, its first quarterly dividend since 2019.
Additionally, the lender announced the start of a fresh cycle of buybacks worth up to $2 billion.
CEO Noel Quinn stated in the results announcement that "With the good momentum we have in our business, we expect to have substantial future distribution capacity for dividends and share buybacks."
HSBC reported deposit outflows for the period, similar to other British lenders if the deposits it received by supporting the local branch of failing US lender Silicon Valley Bank were deducted.
Large European banks have reported declining deposits as consumers look for better paying products like fixed-term deposits and investment funds in response to the rising cost of living.
Despite the sharp increase in profit, HSBC did not raise its key performance goal of achieving a return on tangible equity of at least 12% starting this year, despite expectations from analysts that it would.
By fLEXI tEAM