HSBC Holdings (NYSE:HSBC), the largest bank in Europe, reported a substantial rise in Q3 pre-tax profit to $7.7 billion, marking a 240% increase from the previous year's $3.2 billion. This growth was attributed to rising interest rates but fell short of the anticipated $8.1 billion, as the bank faces pressure to appease investors who have been patient for returns.
The bank also announced a new share buyback plan worth $3 billion, set for completion by February. This move will bring total buybacks this year to $7 billion. In addition to this, HSBC issued a third interim dividend of 10 cents per share, culminating in a total payout of 30 cents per share for the current year.
Despite these promising figures, HSBC forecasts a 4% cost increase due to escalating tech and operational expenses and potential staff bonuses for Q4. The bank also recorded a $500 million impairment related to mainland China's commercial real estate sector.
HSBC's net interest margin stood at 1.70%, showing signs of strain as customers shifted their deposits to term products. The bank's operations in Asia were highlighted, along with concerns over the uncertain economic outlook of the UK.
This financial performance comes amid an environment of rising interest rates due to central bank hikes against stubborn inflation. This climate allowed for the share buyback and interim dividend payout, though gains were moderated by increased tech costs and the impairment charge connected to China's volatile commercial real estate sector.
HSBC is closely monitoring these exposures, particularly regarding China Evergrande (HK:3333), which is facing a winding-up petition in a Hong Kong court over its substantial debt of $300 billion. The bank has expressed apprehension about the UK's economic future.
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