- HSBC profits rise.
- Higher interest rates boost income.
- China property market impact.
HSBC’s profits have surged due to rising interest rates, and the banking behemoth intends to distribute billions more to shareholders.
Robust Financial Performance
In the three months leading up to September, HSBC reported profits of $7.7 billion (£6.35 billion), more than doubling from the same period the previous year but falling short of expectations.
Impact of Higher Interest Rates
The company stated that higher interest rates had benefited it, allowing it to charge more to lend to individuals and businesses.
On Thursday, the Bank of England is scheduled to disclose its most recent rate decision.
At 5.25%, it is widely anticipated to remain for a second month. Before that, the central bank had increased interest rates from an all-time low of 0.1% fourteen times in succession.
The US Federal Reserve is scheduled to release its most recent decision on Wednesday. Additionally, other central banks have been increasing interest rates; HSBC stated that “the higher interest rate environment” had stimulated global growth.
This year, the company anticipates its net interest income, calculated as the difference between interest earned from lending money and interest paid to savers and depositors, to surpass $35 billion. It increased to $9.2 billion in the most recent results for the three months ending September 30 from $8 billion during the same period last year.
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In June, Chancellor Jeremy Hunt said the process was “taking too long” and pressured banks to raise depositors’ interest rates.
Alicia Garcia-Herrero, chief economist for the Asia Pacific region at investment bank Natixis, remarked that before the escalation of interest rates, banks generated comparatively meagre profits from lending money but were obligated to remunerate businesses and individuals who deposited funds.
Global Growth and Dividends
HSBC gave $3 billion to shareholders, raising the total to $7 billion this year. Dividends will also be distributed.
Although the bank’s profit increased during the previous three months, analysts had anticipated a higher figure of $8.1 billion.
Operating expenses at HSBC increased, partly due to performance-based compensation, higher technology costs, and the effects of inflation.
The government declared the elimination of a restriction on banker bonuses last week. The legislation will be enacted on Tuesday, October 31st, nearly a decade after its proposal after the 2008 financial crisis.
In the preceding fiscal year, HSBC reduced its bonus pool by 4%, amounting to $3.4 billion.
The bank, headquartered in London, derives the majority of its revenue from operations in Asia.
China’s Property Market Impact
It reported suffering a $500 million loss due to the crisis-stricken property market in China, which was led by Evergrande.
We continue to monitor risks related to our exposures in mainland China’s commercial real estate sector closely, and there remains a degree of uncertainty in the forward economic outlook, particularly in the UK,” according to it.
Standard Chartered, an Asia-focused competitor of HSBC, disclosed an unforeseen decline in its third-quarter profit last week. The reduction was due to a $1 billion loss from China’s banks and real estate.
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