HSBC releases its financial results for the first quarter of 2023, compared with 2022, beating estimates.

Latest results from HSBC released this week reveal that profit before tax rose by $8.7 billion to $12.9 billion in the first quarter of 2023, compared to the same time last year.  

This includes a $2.1 billion reversal of an impairment relating to the planned sale of its retail banking operations in France, as the completion of the transaction has become less certain, and a provisional gain of $1.5 billion on the acquisition of Silicon Valley Bank UK in March, the bank said in a statement. 

On a constant currency basis, profit before tax increased by $9.0 billion to $12.9 billion. Profit after tax increased by $7.6 billion to $11 billion, the bank added. 

Revenue increased by 64 per cent to $20.2 billion. The increase was driven by higher net interest income in all of the firms global businesses due to interest rate rises. It also included gains related to the transactions in France and the UK. On a constant currency basis, revenue rose by 74 per cent to $20.2 billion, the bank said. 

Net interest margin also rose by 1.69 per cent whilst expected credit losses and other credit impairment charges of $0.4 billion were down by $0.2 billion. The reduced Q1 23 charge reflected a favourable change in the probability weightings of economic scenarios and a low stage 3 charge of $0.4 billion, the bank continued. The Q1 22 charge reflected economic uncertainty mainly due to the Russia-Ukraine war and inflationary pressures, the bank said. 

Meanwhile, operating expenses of $7.6 billion were $0.6 billion or 7 per cent lower than in Q1 22. The reduction was primarily due to lower restructuring and other related costs following the completion of its cost-saving programme at the end of 2022, and ongoing cost discipline, the bank continued. Higher technology costs and the impacts of rising inflation continued to affect its operating expenses. On a constant currency basis, and excluding notable items and the impact of retranslating the Q1 22 results of hyperinflationary economies at constant currency, operating expenses rose by 2 per cent. 

Customer lending balances also rose by $40 billion in the quarter, the bank said. On a constant currency basis, lending balances grew by $32 billion, mainly as $25 billion of balances associated with its retail banking operations in France were reclassified from held for sale during the period. In addition, the growth included $7 billion of additional balances following its acquisition of SVB UK during the quarter.

Excluding these factors, customer lending was stable, the bank said. 

The board also approved a first interim dividend of $0.10 per share. It intends to initiate a share buy-back of up to $2 billion, which it expects to start following its 2023 Annual General Meeting. The share buy-back is expected to have an approximately 25 bps impact on the CET1 capital ratio, the firm said. 

From 1 January 2023, the bank adopted IFRS 17 ‘Insurance Contracts‘, which replaced IFRS 4 ‘Insurance Contracts‘. Comparative data have also been restated. 

The bank said it remains confident of achieving its return on average tangible equity target of at least 12 per cent for 2023 onwards, which is not dependent on the impact of material acquisitions and disposals. 

Based on the current market consensus for global central bank rates, its net interest income expectations are unchanged from its full year guidance. After including an approximately $2 billion reduction due to the implementation of IFRS 17 ‘Insurance Contracts’, it expects to achieve net interest income of at least $34 billion in 2023. While the interest rate outlook remains positive, it expects continued pressure from increased migration to term deposits as interest rates rise. 

It continues to use a range of 30 bps to 40 bps of average loans for planning its ECL charges over the medium to long term.

The bank also remains focused on maintaining cost discipline. Its acquisition of SVB UK, and the related investments internationally, are expected to add about 1 per cent to the group‘s operating expenses.

This is in addition to its 2023 target of keeping cost growth to about 3 per cent, excluding the impact of foreign currency translation differences, notable items and the impact of retranslating the 2022 results of hyperinflationary economies at constant currency, the bank continued. 

Noel Quinn, group chief executive, said: “Our strong first quarter performance provides further evidence that our strategy is working. Our profits were spread across our major geographies, and all three global businesses performed well as we continued to meet our customers‘needs through our internationally connected franchises. Our return on tangible equity was 19.3 per cent, excluding the impact of strategic transactions.” 

“As a result, we have announced our first quarterly dividend since 2019 of $0.10 per share, as well as a share buy-back of up to $2 billion. We remain focused on continuing to improve our performance and maintaining tight cost discipline, but we also saw an opportunity to invest in SVB UK to accelerate our growth plans,” he added. 

HSBC's UK arm bought the UK part of Silicon Valley Bank for a nominal sum of £1 a few weeks ago, and Chinese insurance group Ping An, a large HSBC shareholder, continues to claim that HSBC should be broken up.