2nd May 2023 11:26
(Alliance News) - After a rocky few months in the banking sector, HSBC Holdings PLC's financial strength serves as a "beacon", with investors pleasantly surprised by its robust first-quarter performance.
In the first quarter of 2023, the Asia-focused lender said its pretax profit more than tripled to USD12.89 billion from USD4.14 billion a year before. This was well above market consensus of USD8.64 billion.
Shares in HSBC were up 5.0% to 602.45 pence each in London on Tuesday morning. interactive investor analyst Richard Hunter said the market view of the shares, largely at 'buy', "will most likely remain firmly intact".
Hargreaves Lansdown analyst Matt Britzman commented: "There's a fair amount to unpick in these results, with a few elements flattering performance figures."
HSBC explained that the profit figure was boosted by a USD2.1 billion reverse of an impairment related to the sale of its French retail banking arm.
"Higher rates in France mean the sale of HSBC's French retail business is looking less likely, and impairment charges relating to the sale have been reversed for now. That provided a boost to profit, but this isn't the best news in the long run," HL's Britzman considered.
Profit was also aided by a USD1.5 billion provisional gain from the acquisition Silicon Valley Bank UK Ltd, which it snapped up for just GBP1 in March, after the failure of its US parent company.
The buy looks like a "steal", Britzman said, adding: "It's hard to knock a provisional gain of USD1.5 billion and increased exposure to the high-growth tech and life sciences sectors."
"Even without the SVB UK and French adjustments, [the pretax profit figure] is comfortably ahead of estimates," ii's Hunter added.
In light of the strong performance, HSBC declared its first quarterly dividend since 2019, announcing a payout of USD0.10, topping market expectations of USD0.08. It also announced a share buyback of up to USD2 billion.
The dividend of 4.4% is likely to prove "attractive" to income-seeking investors, Hunter noted.
ii's Hunter also pointed to strong performances across all of the bank's divisions.
The bank reported net interest income rose 38% year-on-year to USD8.96 billion from USD6.48 billion. Market analysts had been expecting USD8.85 billion, according to company-compiled consensus.
Net operating income reached USD19.74 billion, compared to USD11.67 billion a year before.
"In particular, Global Banking & Markets saw spikes in foreign exchange and debt trading markets while the Wealth & Personal Banking unit reaped the benefit of increased customer activity following the reopening of the mainland Chinese border post pandemic restrictions," Hunter said.
The broad strength of the bank's performance was something that HSBC CEO Noel Quinn was quick to point out, affirming the results as evidence the firm's "strategy is working".
The comments come amid the recent dispute with its largest stakeholder, Chinese insurer Ping An Insurance Co of China Ltd.
Ping An has put forward proposals for HSBC to divest of some of its Asian operations, and list them separately in Hong Kong.
In a public statement last month, the insurer cited HSBC's underperformance against its peers. It also pointed to the precarity of the bank's strategy of straddling East and West amid simmering geopolitical tension between the US and China.
HSBC had responded by urging shareholders to vote down the proposals at its annual general meeting. The AGM will take place on Friday.
"[The proposal] remains contrary to HSBC's tradition of globally interconnected banking and one which it fully intends to continue to resist. More broadly, the turmoil of recent months has enabled the bank to flex its financial muscles and reiterate its power," ii's Hunter commented.
By Elizabeth Winter, Alliance News senior markets reporter
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