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HSBC's 92% Surge in Quarterly Profit

HSBC reports a 92% surge in quarterly Profit, but conservative forecasts and cost-cutting measures dampen investor expectations. Bank to return to paying quarterly dividends and share buybacks in 2023.

HSBC building
HSBC building

HSBC reported a 92% surge in its quarterly Profit, yet investors' expectations of a sustained income were dampened. The bank said it would pay a special dividend of $0.21 per share from the $10 billion sale proceeds of its Canada business. Despite the payout promises, the lender's shares fell 2% in Hong Kong as investors weighed moderate income forecasts against the environment of rising rates.

Conservative Forecast Despite Rising Interest Rates

With its $1.3 trillion in customer deposits, HSBC benefits more than many smaller banks from central bank hikes. However, the bank expected net interest income to be at least $36 billion in 2023, shy of $37 billion forecasts and a $38 billion annualized figure analysts calculated. Chief Executive Noel Quinn stated that the conservative forecasts were partly due to pressure from competitors to raise deposit rates.

HSBC logo
HSBC logo

Returning to Regular Dividends and Share Buybacks

HSBC will return to paying quarterly dividends in 2023 and will bring forward the consideration of fresh share buybacks to the first quarter of 2023. The Asia-focused bank's shares have rebounded 45% from October 2022 lows but have underperformed a 50% rise in the broader market. So far this year, the stock has risen 20% versus a 7% rise in the FTSE index.

Continuing Cost-Cutting Measures

Noel Quinn, overseeing a program of job cuts, said, "there will be no easing off at all on costs...we are now considering up to $300 million of additional costs for severance in 2023." Despite the fourth-quarter surge, annual Profit fell to $17.5 billion due to an impairment in selling its retail banking operations in France. HSBC said it still expects to complete the sale of its Russia business in first-half 2023, taking a $300 million loss.