30th Apr 2024 10:49
(Alliance News) - HSBC's first quarter results were on balance viewed positively, as a bigger-than-expected share buy back and above forecast profit offset news of the surprise departure of Chief Executive Noel Quinn.
Shares in HSBC rose 3.6% to 692.35 pence each in London on Tuesday.
The London-based, Asia-focused lender said first-quarter net interest income fell 3.4% to USD8.65 billion from USD8.96 billion year-on-year, though came in higher than company-compiled consensus of USD8.50 billion. Net operating income increased 1.5% to USD20.03 billion from USD19.74 billion.
Pretax profit was USD12.65 billion, 1.8% lower than the prior year's USD12.89 billion, but ahead of USD12.61 billion consensus. HSBC noted the figure included a USD4.8 billion gain following the disposal of its Canadian banking business, which was partially offset by a USD1.1 billion impairment related to the sale of its business in Argentina.
HSBC said it has approved a first interim dividend of USD0.10 per share, up year-on-year from USD0.09. It will also pay a special dividend of USD0.21 following the sale of its Canadian banking business. In addition, it announced a new share buyback of up to USD3 billion, following the conclusion of the USD2 billion buyback announced with its full-year results.
HSBC said Quinn has informed the board of his intention to retire from the bank after nearly five years leading the company, and 37 years at the firm in total. Quinn said he plans to "pursue a portfolio career" going forward.
A formal process to find Quinn's successor has begun, with HSBC considering both internal and external candidates. Quinn will continue as CEO during the process, the firm said.
The company left guidance unchanged from that provided in February with the annual results.
Richard Hunter, head of markets at interactive investor, felt the "global banking behemoth" has "returned to form" in the first quarter "buoyed by an ongoing strategic reshuffle while continuing to reap the benefit of its vast and sprawling presence."
He noted the retirement of the CEO will inevitably spark questions over the bank's strategy.
"Streamlining over the last few years, including exiting from less profitable regions, has been a central plank," he pointed out.
"However, there have also been increasing calls for the Asian business to be spun off, which HSBC has firmly resisted, and it is possible that this debate may resurface once the new CEO is named," Hunter suggested.
Russ Mould, investment director at AJ Bell, said it had been a "rollercoaster ride for Quinn."
"First, he became interim boss in 2019, trying to steady the ship after it was navigated off course by predecessor John Flint. Covid then struck and Quinn had to guide the bank through a pandemic that turned the world upside down," Mould explained.
"While a rapid increase in inflation led to higher interest rates which is beneficial for the banking sector and HSBC's net interest margins, Quinn still had to deal with plenty of business and consumer customers facing extreme financial pressures," he added.
"It would have been easy to sit tight and try and ride out the uneven market backdrop, yet Quinn pressed ahead with a plan to sharpen the bank's focus on Asia and pull out of certain other geographies," Mould said.
"He is getting out while the going is good, destined to be seen as the man who fixed HSBC," Mould remarked.
Hunter at interactive investor said among the bank’s immediate strategic objectives are to grow its international businesses while also diversifying its revenue, especially in the likes of its wealth businesses in Asia.
Shore Capital banking analyst Gary Greenwood said adjusted pretax profit was 11% ahead of expectations. This was driven by positive variances on income, costs, impairments, and joint venture and associate income.
Greenwood said while the was no formal consensus forecast for the share buyback, the proposed USD3 billion beat his, and most analysts', USD2 billion expectation.
Greenwood also noted the dividend, CET1 capital ratio and return on tangible equity were ahead of forecast.
"On balance, this appears to be a positive update," he said.
By Jeremy Cutler, Alliance News reporter
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