Banking giant HSBC has unveiled its second share buyback of the year after profits more than doubled thanks to interest rate rises in the UK and globally.
The company notched up pre-tax profits of 21.7 billion US dollars (£16.9 billion) for the first half of 2023, up from 8.4 billion US dollars (£6.6 billion) a year ago after a better-than-expected performance in the second quarter.
It said revenue soared by 51 per cent to 36.9 billion US dollars (£28.8 billion) over the half-year, boosted by higher interest rates.
HSBC also hiked its full-year guidance for net interest income to over 35 billion US dollars (£27.3 billion) in the wake of “current market consensus for global central bank rates”.
Interest rate surge
Interest rates have been surging in the UK and globally as policymakers look to rein in high inflation.
In Britain, this has sent mortgage rates racing to highs not seen for 15 years, adding to cost pressures and sky-high food prices that are hitting households and businesses hard.
British banks – which have seen their figures buoyed by rising borrowing costs – have come under pressure this year to do more to pass on interest rate rises to savers.
HSBC group chief executive Noel Quinn insisted the group was “trying to get the balance right between savings and mortgages”.
He said: “We’re very cognisant of the pressure that people are facing at the moment in a high interest rate environment.”
The bank set aside 900 million US dollars (£702 million) in the second quarter, up 500 million US dollars (£390 million) on a year ago, for loans expected to turn sour amid the cost crisis and wider economic uncertainty, with much of the increase due to worries over commercial real estate lending in China and commercial loans in the UK.
This took its expected credit losses charge to 1.3 billion (£1 billion) for the first half as a whole.
HSBC said that between the last quarter of 2022 and the end of 2023, more than half of all its fixed rate mortgage customers will have come off their deals on to more expensive rates.
Small proportion of customers are struggling
But HSBC said a very small proportion of customers are struggling.
The results come as banks are facing widespread reforms over account closures after the Nigel Farage de-banking row that last week led to the resignation of NatWest chief executive Alison Rose.
Mr Quinn said HSBC does not close customer accounts “based on their lawful personal views” and said the group was looking for clarity over the rules after the Government demanded an overhaul of the regulations, including the need to give customers more notice that accounts will be shut.
There have been concerns that this could leave banks exposed to financial crime and money laundering.
“It’s in all our interests that there’s clarity on this point,” Mr Quinn said.
The group’s figures showed profits were also buoyed by a 1.5 billion US dollar (£1.2 billion) provisional gain from its purchase of the UK arm of collapsed Silicon Valley Bank (SVB UK).
It launched another 2 billion US dollar (£1.6 billion) share buyback programme – following on from the last one announced in May – as it continues to boost investor returns in the face of pressure from its biggest shareholder, Chinese insurer Ping An.
Mr Quinn cheered a “strong first-half performance”.
“There is still much work to do, especially given the many challenges in the global economy, but I am confident about the future,” Mr Quinn added.
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