There has been a lot to digest as the UK’s major banks reported results for the third quarter last week, and it was no different when HSBC brought the autumn reporting season to a close today.
In common with all the London-listed big banks, HSBC said its rise in profits had been driven by higher interest rates, while offering signs that the benefit from this cycle may have reached its peak.
The bank’s net interest margin, broadly the difference between the interest it charges on loans and what it pays depositors on savings, was 1.7% higher in the third quarter than for the corresponding period last year, but down marginally on the preceding quarter this year.
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Echoing the news which has emerged in recent days from NatWest, Lloyds and Barclays, HSBC has seen customers switch balances to term products that traditionally offer higher rates of interest, putting pressure on margins. In the case of HSBC, this pattern has been particularly pronounced in Asia.
Profits at HSBC did increase in the third quarter, climbing to $7.7 billion for the three months to September versus $3.2bn at the same stage in 2022. But the rise was less than the market expected, as the bank reported a rise in operating expenses, by 2% to $8bn, and set aside $0.5bn to cover losses on its exposure to the troubled commercial real estate market in China. Chief executive Noel Quinn reportedly said today that he believes the worst of the property crisis in China is over.
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While warning that a further rise in costs could be on the cards over the remainder of the year, investors would have taken some cheer from the announcement of a further share buyback. The $3bn buyback announced today would take the total for the year to up to $7bn.
A third interim dividend of $0.10 per share was also unveiled.
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