Earnings after tax increased by more than 235% year-on-year

HSBC’s profit after tax was $6.26 billion in the three months to the end of September, up 235% compared to $2.66 billion in the same period last year.

Europe’s largest bank by assets also saw its pre-tax profits during the quarter rise by $4.5 billion to $7.7 billion, mainly due to the higher interest rate environment.

However, the numbers Expectations by economists were disappointedwho had expected third-quarter earnings after taxes of $6.42 billion and earnings before taxes of $8.1 billion.

HSBC said the increase was partly due to a $2.3 billion impairment loss in the third quarter of 2022 related to the planned sale of its retail banking operations in France.

Of this amount, $2.1 billion was reversed in the first quarter of 2023, as it became uncertain that the deal would be completed.

“We now expect these operations to be reclassified to held-for-sale operations in 4Q23, at which point the impairment will be reinstated,” she added.

Revenue rose to $7.71 billion in the third quarter from $3.23 billion a year ago. HSBC also attributed this to the high interest rate environment, saying it supported growth in net interest income across its global business.

Net interest margin – a measure of lending profitability – was 1.7%, up 19 basis points year-on-year, beating estimates of 1.68%.

However, net interest margin decreased by 2 basis points compared to the previous quarter. HSBC said this reflects an increase in the number of customers migrating their deposits to term products, especially in Asia.

In the nine months to September, profits after tax were $24.33 billion, compared to $11.59 billion in the first nine months of 2022.

HSBC shares listed in Hong Kong rose 0.43% after the announcement.

In light of the results, the bank’s Board of Directors approved the distribution of a third interim dividend of 10 cents per share. HSBC also said it will initiate another share buyback worth up to $3 billion, which is expected to begin “soon” and be completed by the full-year results announcement on February 21, 2024.

Group CEO Noel Quinn said in the statement: “We are pleased to reward our shareholders once again. We have now announced three share buybacks in 2023 with a total value of up to $7 billion, in addition to three quarterly dividends totaling $0.30 per share.” . “This underscores the significant distribution capacity we have, even as we continue to invest in growth.”

The buyback is expected to have a 0.4 percentage point impact on its common equity Tier 1 capital ratio, or CET1 ratio, the bank said. The CET1 ratio is a measure of the financial flexibility of European banks.

Going forward, HSBC said it plans to reduce the CET1 ratio to between 14% and 14.5%, down from the current level of 14.9%. It revealed that the dividend distribution rate is 50% for the years 2023 and 2024, excluding the outstanding essential elements.

Correction: The headline has been updated to reflect HSBC announcing a $3 billion share buyback.