HSBC is to buy back up to $2bn of its stock in a bid to shore up investor support as its biggest shareholder Ping An ramps up criticism of the London-based lender.
The bank’s pre-tax profits jumped to $12.9bn in the first three months of this year, more than three times the figure from a year earlier and beating analysts’ expectations for $8.6bn, to pave the way for greater capital returns to shareholders. The stock rose 5 per cent in London after the filing on Tuesday.
The surge in profits was partly due to a provisional gain of $1.5bn from its £1 rescue of the UK arm of collapsed lender Silicon Valley Bank in March.
HSBC also reversed $2.1bn of impairments linked to the planned sale of its French retail banking network to the private equity firm Cerberus. The bank warned last month that the deal, agreed in 2021, was in doubt because significant interest rate hikes mean the private equity buyer will have to inject more capital.
The bank reported that income from trading rose 13 per cent to $2.4bn. It reduced its provisions for potential bad loans due to “improved economic assumptions” in Hong Kong as the city reopened after lifting its Covid-19 restrictions.
“Performance looks strong,” said Numis analyst Jonathan Pierce. “HSBC reported above consensus earnings, stable deposits and, perhaps most importantly in the context of distributions, a common equity tier one ratio of 14.7 per cent”, comfortably in excess of its regulatory requirements.
HSBC also said it would return to making its dividend payouts every quarter, meeting a key demand of its Hong Kong retail investor base. It set the payout at 10 cents a share and said it planned to pay a special dividend once the $10bn sale of its Canadian business closes next year.
Such overtures are crucial as HSBC works to secure the support of its wider investor base and fend off the increasingly hostile demands of its largest shareholder Ping An. The Chinese insurer said last month it was “deeply concerned about HSBC” and has spent the past year calling for the bank to split and separate its Asian operations.
The results showed that HSBC was “delivering on our promises”, chief executive Noel Quinn said. He added that HSBC and Ping An had a shared “desire to improve the performance of the bank” but a “difference of opinion” about restructuring it.
The lender is due to face shareholders at its annual general meeting in the UK on Friday.
The bank’s revenues rose 64 per cent to $20.2bn, fuelled by higher interest rates.
HSBC is one of the world’s largest deposit-taking institutions, making it particularly sensitive to central bank policies. Its net interest margin — the difference between the interest it receives from making loans and the rate it pays out to depositors — rose to 1.69 per cent.
The results were announced a day after the collapse of First Republic, the second-biggest bank failure in US history and the third time in less than two months that the US Federal Deposit Insurance Corporation had taken over a bank.
“We do not believe there’s a global banking crisis on the horizon,” Quinn said, adding he was “pleased there was a resolution” with JPMorgan Chase agreeing to buy most of First Republic’s business.
In March, HSBC bought SVB’s UK business for £1 in a fire sale agreed over a weekend of intense talks. It has since hired more than 40 commercial bankers who used to work at SVB.
HSBC planned to expand the SVB unit in Hong Kong, elsewhere in Asia and potentially in Israel, Quinn said.
Ping An, which owns about 8 per cent of HSBC’s shares, said last month that its spin-off proposal should be “adjusted to a strategic restructuring solution” in which HSBC would remain the controlling shareholder of a separately listed Asian bank.
However, its year-long campaign has so far failed to win support from any other major institutional shareholder.
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