30 October 2023
If you are covering HSBC’s latest results, please see the following comment from Tom Gilbey, equity research analyst at Quilter Cheviot:
“HSBC reported a mixed set of Q3 results this morning, as costs were higher than expected and drove a slight profit miss.
“Adjusted profit before tax rose to $7.77bn, over 100% higher year-on-year, but still 5% below consensus. Revenues were broadly in-line, but costs were worse than estimates and loan impairments were also slightly worse.
“HSBC’s net interest income was as expected, while its net income margin fell 2bps quarter on quarter to 1.70%. However, higher interest rates were a key factor in HSBC’s profit growth. While net interest margins have peaked, with the Bank of England pausing on rate rises, HSBC has large operations outside the UK and the weaker UK net interest margin was partly offset by its Hong Kong operations.
“The company announced a further $3bn share buyback, its third this year, which should keep investors happy.
“HSBC continues to have high quality diversified assets, with loan losses remaining around $1bn. HSBC Return on Tangible Equity (RoTE) was particularly strong at 19.7%. However, guidance has been lowered as a result of higher costs.
“HSBC is now guiding for greater than $35bn of net interest income for FY23 but has also upgraded cost growth to 4% from 3%. It also flags a potential additional 1% further increase due to performance related pay. HSBC still guides for a 12%+ ROTE from 2023, 14.0-14.5% target range for CET1 ratio and a 50% dividend pay-out ratio, comparing favourably versus peers.”
“HSBC’s results have proven much more resilient than its UK peers, which reported last week, as it bucked the trend of net interest margin weakness. The benefits of a diversified business model shone through and has allowed HSBC to continue to return cash through dividends and buybacks."
