Shares of HSBC surged by 4% on Tuesday after the British banking giant reported stronger-than-expected earnings for the third quarter and announced a new $3 billion share buyback program.
The London-based bank posted a 10% increase in quarterly pre-tax profits, totaling $8.5 billion, well above the $7.6 billion analysts expected. HSBC’s solid financial performance and expanded capital return initiatives come at a time of strategic shifts under new leadership.
The bank’s revenue climbed 5% year-over-year to reach $17 billion, driven by a robust 32% growth in its wealth management division, which offset declines in net interest income. The third-quarter performance also reflected continued gains from higher client engagement across wealth and personal banking, alongside solid trading activity in its global banking sector. Despite the improved quarterly results, HSBC maintained its full-year financial outlook.
Profit after tax for the quarter was $6.7 billion, $500 million more than the same quarter last year, and basic earnings per share (EPS) came in at $0.34, compared to $0.29 in the previous year. However, the bank saw a dip in net interest margin from 1.7% to 1.5%, as profitability from lending activities narrowed in the face of a cooling interest rate environment.
In line with its commitment to return capital to shareholders, HSBC revealed a new $3 billion buyback plan, bringing its total share repurchase target for the year to $9 billion. The bank also declared an interim dividend of $0.10 per share. HSBC plans to complete this buyback by early 2025, further boosting shareholder value after similar repurchases earlier in the year.
HSBC’s new CEO, Georges Elhedery, appointed in September 2024, recently outlined a strategic overhaul that aims to simplify the bank’s structure by dividing its operations into Eastern and Western divisions. This restructuring is expected to streamline decision-making, reduce duplicative processes, and sharpen HSBC’s competitive edge in key markets. The bank is also working on consolidating its London headquarters, moving from Canary Wharf to the City of London.
The restructuring aligns with HSBC’s response to calls from top shareholder Ping An to separate its profitable Asian operations from its UK business due to rising geopolitical pressures between China and the US.
HSBC’s third-quarter results and buyback announcement received positive feedback, with shares trading 4.6% higher in London and 3.7% in Hong Kong. Analysts, including Morningstar’s Michael Makdad, described the earnings as solid, with “no major surprises,” citing stable net interest income and strong results from wealth and personal banking.
Analysts also noted that while HSBC has benefited from higher interest rates in recent years, its net interest income could come under pressure as the rate cycle begins to reverse. Additionally, operating expenses rose by 2% due to inflation and technology investments, a trend the bank may continue to monitor as it adjusts to the evolving economic landscape.
Looking forward, HSBC expects to complete its sale of its Argentinian banking business to Grupo Financiero Galicia by the end of 2024, further streamlining its global operations and sharpening its strategic focus.
With input from CNBC, Market Watch, and Forbes.
