HSBC Holdings Plc (LON:HSBA) has reported a doubling of its third quarter profits to $7.7 billion, bolstered by higher interest rates globally. The bank's profits were driven by rate hikes from central banks such as the Bank of England and the US Federal Reserve, which led to increased lending charges. Despite this surge, the bank's profits fell short of the projected $8.1 billion due to increased operating expenses related to performance-related pay, technology costs, and inflation.
In response to its strong financial performance, HSBC announced an additional $3 billion in share buybacks, bringing the total to $7 billion for this year. This move is expected to satisfy investors despite the lower-than-expected profits. The bank's shares remained steady at £600p, valuing the bank at £118 billion.
HSBC's profits primarily stem from its operations in Asia, with UK profits seeing a modest increase from $1.6 billion to $1.78 billion. Despite this growth, the bank incurred a $1.1 billion bad debts impairment charge, with Chinese commercial real estate accounting for $500 million of it. This loss was linked to China's Evergrande-led property market crisis.
Shareholder Ping An of China has called for a split of the bank, a suggestion that has been countered by HSBC CEO Noel Quinn and other investors who remain confident in the bank's strong financial performance and its targeted mid-teens return on tangible equity by 2023.
The Bank of England is expected to maintain interest rates at 5.25%. Meanwhile, HSBC anticipates its net interest income to cross $35 billion this year, even as Chancellor Jeremy Hunt appeals for banks to transfer higher rates to savers.
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