After a mixed reception to UK bank earnings in recent days – with shares in Barclays (BARC) up more than 5% while NatWest (NWG) shares fell nearly 4% – investors were unsure what to expect when Europe’s biggest lender by market value, HSBC (HSBA), reported its results on 2 May.

In the event, despite a fairly messy set of numbers, the first quarter turned out to be stronger than expected, allowing the bank to bring forward its buyback plan and restart dividend payments.

The shares gained 5.5% to 605p, adding more than £5 billion to the bank’s market value and returning it to the top three position in the FTSE 100 index, ahead of consumer goods giant Unilever (ULVR).

Pre-tax profits for the three months to March more than trebled to $12.9 billion from $4.2 billion in the same period a year ago, way above market forecasts of $8.7 billion, helped by higher interest rates and a couple of positive one-off items including a $1.5 billion paper gain on the acquisition of Silicon Valley Bank’s UK operations.

Revenue climbed 64% to $20.2 billion driven by higher net interest income across all the bank’s global businesses, although in an interview with Bloomberg chief executive Noel Quinn accepted 2023 was probably the year the contribution from rising interest rates ‘topped out’.

Adjusting for the reclassification of its French assets and a gain from buying Silicon Valley Bank UK, deposits were actually down slightly during the quarter but not enough to worry investors.

The firm said it would pay $0.10 per share in dividends for the first quarter, the same level as it distributed before the pandemic, and announced a $2 billion buyback.

The bank had planned to introduce the buyback in the second half, but a combination of better results and pressure from its major shareholder, Chinese insurer Ping An (2318:HKG), to improve returns resulted in the CEO bringing it forward by six months.

‘With the good momentum we have in our business, we expect to have substantial future distribution capacity for dividends and share buybacks,’ insisted Quinn.

Whether a return to dividends and the promise of ‘jam tomorrow’ will be enough for Ping An to moderate its calls for change is hard to tell, but we suspect shareholders could still see fireworks at the bank’s annual general meeting on 5 May.

One major London investor revealed to Shares last week they were ‘broadly supportive’ of the Chinese firm’s call to break up HSBC and let it focus purely on Asia, and with the French and Canadian businesses still kicking around the pressure could grow in the coming weeks to split.

‹ Previous2023-05-04Next ›