HSBC will hand more than $3bn (£2.5bn) to shareholders, after higher interest rates helped to more than double quarterly profits, despite taking a financial hit on China’s property crisis.
The London-headquartered bank said it was launching the share buyback, and pay a dividend worth 10 cents a share, after what its chief executive, Noel Quinn, hailed as “three consecutive quarters of strong financial performance”.
The move came as HSBC revealed it had made $7.7bn in pre-tax profits between July and September. While it fell short of average analyst forecasts for $8.1bn, it was more than double the $3.2bn it made during the same period last year.
The profits were supported by a 15% rise in net interest income, which accounts for the difference between what it charges for loans and mortgages, against what it pays out to savers.
It helped offset the $1.1bn that HSBC put aside to cover potential defaults. That includes $500m linked to China’s struggling commercial property market, where HSBC – which makes the bulk of its profits in Asia – has a $13.6bn exposure.
HSBC bosses said that while the Chinese property market was unlikely to get much worse, the recovery process would be slow.
“The summer developments have been somewhat worse than we anticipated earlier in the year, right after the Covid lockdown,” said Georges Elhedery, chief financial officer.
“Looking forward, I think we are expecting still a couple of quarters of difficulty as the sector adjusts. We are definitely encouraged by the ongoing policy measures that have been taken to ease the pressure on the sector, and to allow it to get through this challenge,” he said.
HSBC’s shares rose by 1.1% on Monday morning.
The rise comes days after banking rival Standard Chartered shares tumbled more than 11%, on news that its pre-tax profits more than halved due to its exposure to China. Its earnings were knocked by a $186m hit on China’s property sector and having to write down the value of its investments in China Bohai Bank.
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“After seeing Standard Chartered take an unexpected impairment last week relating to its China assets, [HSBC’s] credit losses were under a microscope,” said Matt Britzman, an equity analyst at Hargreaves Lansdown.
But HSBC’s loan charges were ultimately in line with expectations, providing some relief for investors who will also be cheering the jump in payouts.
“There’s still a cloud of uncertainty hovering over the market, but investors will be happy to see no nasty surprises,” Britzman said.
