1 August 2023
If you are covering HSBC’s latest financial results, please find below a comment from Will Howlett, equity research analyst at Quilter Cheviot:
“HSBC delivered a strong set of results in the second quarter, with profits before tax up 89% on the year, as revenues were boosted from rising interest rates and loans and costs were largely in line with expectations.
“HSBC is in a strong position compared to the other large UK banks as it isn’t quite so domestically focused. Banks are beginning to be squeezed by governments and regulators to pass on higher interest rates to depositors, and this means net interest margins for many have likely peaked, even with the Bank of England set to raise rates again this week. For HSBC, however, it has large operations outside the UK, where the pressure isn’t so great due to more limited competition. So while the net interest margin will have peaked, it won’t have to fall quite so much as its listed peers.
“The company announced a $2bn share buyback and expected to complete this in three months, highlighting that there might be more to come – something that will make investors very happy. Furthermore, HSBC continues to have high quality assets, with loan losses remaining below $1bln, and guidance on these remaining quite conservative, in a backdrop of economic uncertainty. HSBC raised its key Return on Tangible Equity target and now expects to generate mid-teens returns for both this year and next, comparing favourably versus peers.”
