HSBC Holdings Plc (LON:HSBA) (NYSE:HSBC), valued at $118.6 billion, reported a pre-tax profit of $7.7 billion for the third quarter on Monday, doubling last year's figure but falling short of the $8.1 billion broker estimate. The bank also announced an additional $3 billion share buyback, with a target completion date set for February next year. This would bring the total share buybacks for this year to $7 billion.
The bank's Hong Kong-listed shares experienced a 0.26% drop following the earnings release. Jefferies analysts pointed out potential controversy surrounding rising costs, which are projected to increase by up to 5%, surpassing the initial 3% forecast due to growing technology and operational expenses and potential fourth-quarter staff bonuses.
HSBC declared a third interim dividend payout of 10 cents per share, bringing this year's total payout to 30 cents per share. The bank reported a 2% revenue increase in its Global Banking and Markets division, outperforming Barclays' 6% drop. This division, including the large payments business and investment bank, benefited from higher interest rates.
Despite the mixed results, HSBC's wealth business recorded $34 billion of net new invested assets for the quarter and a 12% growth in the wealth balance sheet compared to last year. However, HSBC's net interest margin was squeezed due to customers migrating their deposits to term products, particularly in Asia.
Additionally, HSBC announced the acquisition of Citi China's consumer wealth business and the closure of its New Zealand wealth and personal banking business.
Rising tech costs weren't the only challenge for HSBC this quarter. A $500 million impairment charge associated with China's unstable real estate sector, particularly China Evergrande (HK:3333)'s winding-up petition over its $300 billion debt, checked a 1.4% share price gain during Hong Kong trading. HSBC's net interest margin fell two basis points to 1.70%, due to customers moving deposits to term products. Amid UK economic uncertainties, HSBC is vigilantly monitoring risks concerning its Chinese real estate exposures. The Bank of England's imminent interest rate decision, policymakers' adherence to the 5.25% figure, and easing inflationary pressures in a flat economy are vital in financial predictions.
InvestingPro Insights
According to InvestingPro, HSBC's revenue growth has been accelerating, a trend that aligns with the 2% increase in its Global Banking and Markets division reported in the article. The bank's strong earnings have enabled it to continue dividend payments, as evidenced by the declared third interim dividend payout.
InvestingPro data highlights that HSBC's Market Cap stands at $140.22 billion, with a low P/E Ratio of 6.04. This suggests that the bank is trading at a low earnings multiple, reinforcing the InvestingPro tip about its attractive valuation.
Moreover, HSBC's Revenue Growth for the last twelve months as of Q2 2023 was 28.13%, which is consistent with the bank's accelerating revenue growth. Lastly, the bank's Dividend Yield as of 2023 stands at 9.86%, underscoring its commitment to returning value to shareholders through dividends.
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