HSBC Holdings (NYSE:HSBC) plc reported a robust financial performance in its Q3 2023 earnings call. The bank's profit before tax year-to-date was $29.4 billion, marking an increase of $17.4 billion compared to the same period last year. HSBC also announced a further share buyback of up to $3 billion, bringing the total buybacks announced this year to $7 billion. The bank's CET1 ratio increased by 20 basis points from the previous quarter, reaching 14.9%.
Key takeaways from the call include:
- HSBC's revenue for Q3 was $16.2 billion, up $4.6 billion on a constant currency basis compared to the same period last year.
- Costs were up 1% in the quarter, primarily due to increased technology spend and higher performance-related pay.
- HSBC expects its 2023 costs to be around 4% higher than 2022 due to increased technology and operation spending.
- The bank announced three quarterly dividends totaling $0.30 per share.
- HSBC expects to reclassify their retail banking operations in France as held for sale in the fourth quarter.
- The planned sale of their Canada banking business is on track to complete in the first quarter of 2024.
HSBC exhibited strong growth across its businesses, with wholesale transaction banking revenue up 50% year-to-date and wealth balances up by 12% compared to the same quarter last year. The bank also highlighted its focus on performance-related pay, with potential increases in Q4 based on its financial performance.
The bank discussed various topics during the earnings call, including technology and operations investments, treasury losses, loan growth, and hedging strategies. HSBC made investments in tech and operations due to higher-than-anticipated inflation and to avoid adverse impacts on customer outcomes. It also plans to retrieve treasury losses over the next five years by reinvesting in higher-yielding instruments.
HSBC's loan growth was strong in mortgages and trade, but commercial loan growth in Hong Kong was soft due to economic conditions. The bank also provided an update on its special dividend, stating that it is expected to be completed in Q1 and paid in H1 2024.
Regarding the hedging strategy, the bank intends to continue hedging across all its balance sheets, which has helped reduce the bank's net interest income (NII) sensitivity to downward pressure on rates. The bank also discussed the commercial real estate (CRE) market in China, stating that the market has bottomed out after a significant correction and that they do not expect a big swing back to positive territory.
HSBC has announced that the disposal of Canada and France will contribute to an annualized $1.5 billion of NII. The bank also intends to perform a rolling series of share buybacks as long as capital supports it. The sale of Canada will provide additional funds for buybacks. Loan growth and buybacks are not seen as competing priorities. The company has delivered a 17.1% annualized return on tangible equity and remains committed to cost discipline while investing in growth and supporting dividends and buybacks.
InvestingPro Insights
In line with HSBC's robust Q3 2023 financial performance, InvestingPro data and tips provide additional insights into the bank's financial health and future prospects. According to real-time data from InvestingPro, HSBC has a market capitalization of $137.06 billion and a low P/E ratio of 5.89, indicating that the bank's shares could be undervalued. The bank's revenue growth has been impressive, with a 31.3% increase in the last twelve months as of Q2 2023.
InvestingPro Tips support the bank's strong performance. HSBC's revenue growth has been accelerating, and strong earnings should allow management to continue dividend payments. The bank has consistently increased its earnings per share and has raised its dividend for three consecutive years. These tips, among others, highlight HSBC's strong position in the banking industry and predict profitability in the coming year.
It's worth noting that InvestingPro provides additional tips and real-time data on HSBC and other companies, which can be accessed by subscribing to their Pro service.
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