Banking giant HSBC has reported a sharp increase in profit for the second quarter of 2023.
Currently, this financial institution implements a corporate policy of cost reduction. The bank also benefits from high-interest rates around the world.
On Tuesday, August 1, the giant of the European banking sector announced that, according to the results of the second quarter of this year, its pre-tax profit was fixed at $8.8 billion. This figure is $4.1 billion higher than the result for the first quarter of 2023. Profit growth significantly exceeded analysts’ initial expectations.
The revenue of the financial institution for the second quarter increased by $4.5 billion, reaching $16.7 billion. The positive performance in the period from April to June 2023 led the lender to improve its forecast for the rest of the year, citing consensus on global interest rates.
In the first six months of this year, the bank’s profit amounted to $21.7 billion. This figure is $9.2 billion higher than the result for the same period last year.
The financial institution expects a steady return on tangible capital, which is the main indicator of profitability. The Bank also notes that the impact of significant acquisitions and disposals is excluded this year and next.
The Board of Directors of the financial institution approved the payment of a second interim dividend to shareholders for 10 cents per share. This payment will be made in addition to the existing quarterly dividends of the same size.
The results of the financial institution’s activities for 2022 testified to the lender’s confident movement along the path of recovery after the coronavirus pandemic. In May, the bank reported a tripling of quarterly profit. This result was partly facilitated by high-interest rates and the preliminary profit that the lender expected from the purchase of the British division of Silicon Valley Bank, which went bankrupt in March.
On August 1, HSBC announced its intention to buy shares worth up to $2 billion. The share price of the financial institution after the publication of the report on the results of activities for the second quarter increased by 1%.
The lender receives about 65% of its income in Asia. The bank is not worried about further financial results in this region, but concerns related to uncertain economic prospects are caused by activities in the UK. The lender warns that British consumers may find themselves in a zone of double pressure, as the combination of high inflation and interest rates showing growth dynamics affects the material situation of households. The financial institution expects that in the second half of 2023, the number of mortgage customers who will refuse urgent transactions will increase.
Over the past few years, the bank has been implementing a strategy of severe cost reduction. The financial institution pays a lot of attention to the introduction of automation. The bank is also cutting thousands of jobs and billions in assets. In June, the financial institution announced intention to halve the size of its global headquarters and move from London’s Canary Wharf.
The bank’s CEO, Noel Quinn, said in a note to shareholders that the strong performance in the first half of the year was due to an increase in net interest income in all three global companies amid rising interest rates. He also noted that revenues in global business are partly the result of strict cost control.
The effect of the rate hike is in the area of special attention. On Monday, July 31, the British regulator said that financial institutions should take additional actions and take previously unused measures to share the advantage of high-interest rates with consumers. Critics talk about the discrepancy between savings rates and interest rates.
The UK Financial Conduct Authority has published a report indicating that the nine largest financial services providers in the country, including HSBC, Barclays, and NatWest, passed through only a 28% increase in the base rate, compared with an average of 80% between 2004 and 2009 for most cash savings accounts. The regulator said the pace and scale at which firms pass on higher rates to savers should improve, especially during a period of rising cost of living.
As we have reported earlier, HSBC Tests Quantum Tech in London to Guard Against Hacks.