HSBC wealth revenues boosted by structured product sales

HSBC has posted strong earnings in the third quarter, with profit pre-tax rising 10% year-on-year to US$8.5 billion.

The British bank said the higher figures were driven by revenue growth in its wealth and personal banking division and foreign exchange, equities and global debt markets in the global banking and markets division, according to its earnings report released this week. Revenue increased by five percent to US$17 billion compared with last year’s same time.

There was strong revenue growth and good performances in wealth and wholesale transaction banking - Georges Elhedery, CEO

The bank’s wealth and personal banking division saw its profit before tax at US$3.2 billion in Q3 2024, up 16% compared to Q3 2023. Wealth revenue surged by a quarter to nearly US$2.4 billion in the third month ended September.

In the first nine months of the year, HSBC’s wealth revenue was up 15% year-on-year to US$6.7 billion. The bank noted that one-third of which came from investment distributions revenue, up 12% year-on-year to US$2.2 billion, supported by ‘higher sales of mutual funds, structured products and bond’ and the ‘improved market sentiment’ notably in its Asian entities.

Meanwhile, private banking revenue was also 15% higher to roughly US$2 billion in the nine months ended September, buoyed by ‘strong performance in brokerage and trading in our entities in Asia,’ it said.

‘There was strong revenue growth and good performances in wealth and wholesale transaction banking,’ the bank’s group CEO Georges Elhedery (pictured), who started the role in September, said in the statement.

The bank highlighted that China’s monetary stimulus plans announced in late September resulted in elevated volatility at the end of the quarter, which increased client activity, particularly in wealth, equities, and global foreign exchange in Hong Kong.

Asia Pacific (Apac) also maintained as HSBC Bank’s most robust region on the structured product issuance front. In Hong Kong SAR, SRP database tracked some 1,292 tranches of equity-linked investments (ELI) issued by the British bank in Q3 2024, roughly similar from Q3 2023 with 1,294 tranches, while structured deposit issuances recorded a nearly seven percent year-on-year increase to 2,330 tranches in the July-September period.

HSBC: Hong Kong SAR retail product issuance by wrapper

_{Source: SRP}

Among ELI product issuances, Nvidia surpassed Alibaba (H shares), the winner in Q3 24, and was the most frequently-used equity underlying asset in Q3 2024, recording 233 products tracking the stock of the US chip, mainly in a single-stock structure and some appearances in equity basket structures. Around 90% of these ELI products have an autocallable feature.

Alibaba reached the second place, seeing the Chinese tech giant’s exposure used in 174 ELI products. Meituan came in third, with 165 related products issued in the third quarter.

The third quarter also gathered 84 interest rate-linked callable notes issued by the British bank – all distributed in-house. Out of 84 products, 44 of which have a five-year-tenor, while the rest were designed as between one- to three-year tenor.

Elsewhere in Asia, the UK bank remained an active issuer of retail-focused structured deposits in China, with 95 product issuances in the third quarter, while Taiwan also saw its structured note issuance reach 1,075 tranches that targeted private banking investors. 

The latest development also came after the strong appetite for linear zero-coupon callable notes among its wealth clients in Apac the first half of the year, a move in position to price in the rate cut cycle, Adam Lau, regional head of capital markets for Asia Pacific at HSBC, said in a September press meeting.

In the first half of the year, HSBC said its capital markets desk within the wealth management unit recorded double-digit year-on-year revenue growth from structured investments within its retail wealth segment in Asia.

Active issuances in the US and Europe

In the US, HSBC also issued 425 unlisted registered notes worth US$1.6 billion in sales volume, 22 certificates of deposit worth US$53m in sales volume, and one unregistered structured note worth US$4m in sales volume. Mainstream indices such as the S&P 500 (227 products) and Russell 2000 (213 products) dominated these products’ underlying exposure.

The bank also issued 34 pension-focused products in its home market, the UK, eight medium-term notes in Germany, and one unit-linked insurance plan in France in the July-September period, SRP data shows.

Rising profit in other divisions

Among other divisions, HSBC’s global banking and markets division posted a profit before tax of US$1.8 billion in Q3 2024, up 38% compared with Q3 2023 (US$1.3 billion). The commercial bank division recorded a five percent year-on-year increase in profit before tax to US$3 billion.

Following a strong performance in the third quarter, HSBC said in the report that it will repurchase up to US$3 billion of the share buyback.

The earnings season also coincided with the bank’s decision to overhaul its structure, splitting geographically into the ‘eastern market’ that covers Asia and the Middle East and the ‘western market’ that covers the UK, Europe, Latin America and North America, a move to seek to cut costs and navigate growing geopolitical tensions.

Under the leadership of the new CEO Elhedery, the change also includes the appointment of the bank's first female finance chief, Pam Kaur.

Shares of HSBC Holdings closed at four percent for the week to HK$71.6 in Hong Kong. 

Click the link to read HSBC’s third-quarter 2024 earnings release and data pack.

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