HSBC PLC on Tuesday announced the reinstatement of a quarterly dividend and a $2 billion share buyback programme amid surging first-quarter profit.
In the first quarter of 2023, HSBC said its pre-tax profits more than tripled to $12.89 billion from $4.14 billion a year before. This was well above market consensus of $8.64 billion.
"This included a $2.1 billion reversal of an impairment relating to the planned sale of our 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," the bank explained.
Back in March, HSBC bought the UK arm of the failed Silicon Valley Bank for the nominal price of £1.
In light of the strong performance, HSBC today declared its first quarterly dividend since 2019, announcing a payout of $0.10, topping market expectations of $0.08. It also announced a share buyback of up to $2 billion. Diluted earnings per share jumped to $0.52 from $0.14.
"With the good momentum we have in our business, we expect to have substantial future distribution capacity for dividends and share buy-backs," chief executive Noel Quinn said.
HSBC’s capital distributions remain independent to the French impairment reversal and the gain from SVB UK, it clarified.
The bank reported net interest income rose 38% year-on-year to $8.96 billion from $6.48 billion. Market analysts had been expecting $8.85 billion, according to company-compiled consensus.
Net operating income reached $19.74 billion, compared to $11.67 billion a year before. Before changes in expected credit losses or other credit impairments, net operating income was $20.17 billion, compared to $12.31 billion.
"The increase was driven by higher net interest income in all of our global businesses due to interest rate rises. It also included the gains related to the transactions in France and the UK," HSBC explained.
The bank's common equity tier 1 capital ratio rose to 14.7% from 14.1% a year before and 14.2% at the end of the fourth quarter of 2022.
"[The rise from the fourth quarter] was driven by capital generation net of the dividend accrual and included an approximately 25bps impact from the reversal of an impairment on the planned sale of our retail banking operations in France. The acquisition of SVB UK had a minimal impact on the CET1 ratio," HSBC explained.
Excluding the impact of strategic transactions, it said its return on tangible equity was 19.3%, compared to 7.2% a year before, and 12.3% in the fourth quarter.
It remains confident of achieving its return on average tangible equity target of "at least" 12% for 2023 onwards. It also reiterated its annual net interest income forecasts of "at least" $34 billion in 2023, based on current market consensus for global central bank rates.
"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," CEO Quinn continued.
He affirmed the results are evidence that the bank's "strategy is working".
The comments come amid the recent dispute with its largest stakeholder, Chinese insurer Ping An Insurance Co of China Ltd.
Ping An has out forward proposals for HSBC to divest of some of its Asian operations, and list them separately in Hong Kong.
In a public statement last month, the insurer cited HSBC's underperformance against its peers. It also pointed to the precarity of the bank's strategy of straddling East and West amid simmering geopolitical tension between the US and China.
HSBC had responded by urging shareholders to vote down the proposals at its annual general meeting. The AGM will take place on Friday.
By Elizabeth Winter, Alliance News senior markets reporter
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