HSBC Shocks With A 74% Increase In Q3 Profit And A $2 Billion Buyback Programme

As concerns about pandemic-related bad loans faded, HSBC Holdings (HSBA.L) announced a surprise 74 percent increase in third-quarter profit, allowing it to launch a $2 billion share repurchase.

However, due to inflationary pressures, HSBC boosted their cost predictions for 2022 to $32 billion from $31 billion.

Chief Executive Neil Quinn said in a statement released on Monday that while they have a conservative stance on the global risk environment they feel the preceding quarters’ lows are behind them.

Quinn, who was appointed in the job just before the pandemic-induced economic catastrophe began in 2020, is counting on Asia to drive development by relocating global executives and investing billions in the lucrative wealth industry.

The bank earned $5.4 billion in pretax profit in the third quarter, compared to $3.1 billion a year ago and the $3.78 billion average expectation of 14 analysts polled by HSBC.

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HSBC released $700 million in funds it had set aside in case pandemic-related bad loans increased, compared to a $800 million charge a year ago at the same time in anticipation of similar defaulted debts.

In actuality, the bank claimed, economic conditions have improved and loans have performed better than planned.

For the third quarter, HSBC did not declare any dividends. However, the bank stated that it will begin a $2 billion share repurchase programme “shortly.”

According to Jackson Wong, asset management director at Amber Hill Capital, investors had been anticipating the bank’s statement on dividends and share buyback plans.

“There are a lot of things going on in the markets currently that they would have to prove that they have confidence in the future,” Wong said ahead of HSBC’s earnings release on CNBC’s “Street Signs Asia.”

The bank’s earnings come as competitors like Citigroup (C.N) benefit from a mergers and acquisitions boom despite battling lending problems.

HSBC’s investment banking division, on the other hand, reported a drop in revenue compared to the same period a year ago, as its global debt business, in particular, slowed.

After Barclays (BARC.L) doubled earnings on Thursday thanks to a solid success from its investment bank advising business, it is the second big British lender to declare robust results for the quarter.

HSBC’s London-listed shares have risen 15% this year, compared to 5% for Asia-focused competitor Standard Chartered (STAN.L), while Barclays (BARC.L) has risen 35% and Citi (C.N) has up 16%.

HSBC Bank Canada’s President and Chief Executive Officer, Linda Seymour, stated:

“This quarter’s profits are much higher than they were at this time last year – which was an upgrade over the first two quarters of 2020. All business lines saw increasing activity and income, with notable increases in bankers’ acceptances, investment funds under administration, and advisory fees, while profit in Wealth and Personal Banking reached levels not seen since 2012.”

“Our customers, as well as myself, are grateful for everything our employees have done to assist them. They’re also curious about how we might assist them in making the transition to a low-carbon future. We introduced 5 new sustainable finance solutions for businesses of all sizes this quarter, including Green Deposits, a first in the market, and financing for electric cars and home efficiency improvements for individuals. We’ll keep innovating to provide them with the digital services, worldwide connections, and long-term finance products they require.”

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