HSBC’s profit jumps on interest rate tailwind, ELI issuance slides in HK

HSBC Holdings has posted robust earnings for the third quarter of 2023, with total revenue jumping 40% year-on-year (YoY) to US$16.16 billion compared with US$11.5 billion in the last year’s same period, according to the bank’s latest earnings report.

There was good broad-based growth across all businesses and geographies, supported by the interest rate environment, Noel Quinn, CEO

The UK bank’s profit before tax soared 140% YoY to US$7.7 billion in the three months ended September – reflecting a ‘continued benefit from higher interest rate,’ a US$2.1 billion reversal of an impairment relating to the planned sale of its retail banking operations in France, and a provisional gain of US$1.6 billion on the acquisition of Silicon Valley Bank UK.

'There was good broad-based growth across all businesses and geographies, supported by the interest rate environment,’ Noel Quinn (pictured), CEO of HSBC Holdings, said in the statement.

Despite rising figures, the profit before tax figure was below the forecast by analysts who cover the group, which came in at US$8.1 billion.

SRP database registers a total of 1,294 equity-linked investments (ELIs) issued by HSBC Bank in Hong Kong SAR during the third quarter, slightly lower from 1,480 in the prior-year period.

The UK bank launched an additional 2,185 dual currency deposits tracking a total of seven FX pairs in Q3 23, up from 1,939 issued in Q3 22. The most popular FX pairs include AUD/USD (673), AUD/HKD (392) and GBP/USD (336).

In Taiwan, HSBC Bank issued some 658 structured notes featuring a shared basket of equity in Q3 23, up 87% YoY whereas Q3 22 saw 352 product issuance. The majority of these products were distributed in-house, along with eight external distributors led by Cathay Securities Investment Trust.

In the US retail market the bank’s activity was slower than in previous quarters, however, with issuance dropping from 330 to 287 YoY, according to SRP data. That led to a 14% decrease in sales volume, amounting to US$1.06 billion.

Wealth and personal banking

HSBC’s wealth and personal banking (WPB) posted US$6.72 billion in revenue in Q3 23, up 71% YoY. Among these, private banking – contributed over 78% of the segment revenue – saw a 20% YoY increase in revenue to US$5.28 billion.

In the meantime, the bank’s wealth balances rose 12% YoY from July to September to US$1.6 trillion. The bank stated that around half of the net new invested assets it gained for the first nine months, which was recorded at US$67 billion, stemmed from the third quarter – Of which US$42 billion was booked in Asia.

During the analysts’ and investors’ earnings call, Georges Elhedery (right), group chief financial officer also highlighted its October announcement to acquire Citigroup's retail wealth management business in mainland China, which will ‘help accelerate [its] growth plans for this business’.

According to HSBC’s earnings release, this portfolio comprises approximately US$3.6 billion in assets under management and deposits as of August 2023 and the associated wealth customers, with the transaction expected to be completed in the first half of 2024.

The global banking and markets (GBM) segment saw its revenue gain two percent YoY to US$3.9 billion in Q3 23. While its banking business contributed to major growth, its markets and securities services (MSS) lagged with a six percent drop YoY – impacted by lowered equities due to ‘lower volatility and client activity’.

The commercial banking (CMB) division’s revenue jumped 22% to US$5.42 billion during the same period, driven by the bank’s global payment solutions.

Additionally, HSBC’s reported operating expenses went up one percent YoY to US$7.97 billion in the third quarter. ‘Lower restructuring costs were offset by higher technology spend, a higher performance-related pay accrual and costs from HSBC Innovation Banking,’ Elhedery said.

According to the report, the bank expects an additional increase of approximately one percent on top of its cost target basis of around three percent YoY growth in 2023 overall due to ‘increased technology and operations expenditure’.

The bank added that it continues to expect net interest income in 2023 to be above US$35 billion.

Click the links to view HSBC’s Q3 2023 earnings report and presentation to investors and analysts.