- HSBC’s H1 Profits More Than Double Due to Rising Interest Rates
- Concerns Over Banks Not Passing on Interest Rate Increases
- FCA Announces “Vigorous Action” Against Banks with Unjustifiably Low Savings Rates
HSBC reported that its profits for the first half of the year have more than doubled due to rising interest rates in the United Kingdom and around the world.
To combat rising inflation, central banks have increased interest rates.
However, British regulators were concerned that banks were not passing on enough of the increases to depositors.
Between January and June of this year, HSBC’s pre-tax profit increased to $21.7 billion (£16.9 billion) from $8.7 billion during the same period last year.
Noel Quinn, the company’s chief executive, stated, “Our financial performance has continued to improve, aided by the prevailing interest rate environment.”
Much of HSBC’s revenue growth was due to a wider disparity between the interest it paid on customer deposits, issued debt, and other offerings and the interest it received from products such as loans, mortgages, and securities.
More than eighty percent of its profits were generated outside of the United Kingdom.
Mortgage interest rates have risen rapidly, whereas savings rates, particularly for simple access accounts, have not increased as rapidly.
The Financial Conduct Authority (FCA) has announced that banks offering unjustifiably low savings rates to their customers will now be subject to “vigorous action.”
Sheldon Mills, executive director of consumers and competition at the FCA, stated that the regulator had a plan to encourage firms to “appropriately” pass on interest rate increases.
He stated that the FCA could fine the bank or take action against the individuals culpable if they repeatedly failed to comply.
Mr. Mills added that the FCA had the authority to levy unlimited penalties, but declined to specify what a typical fine might entail.
In 2023 alone, the Bank of England has increased interest rates four times.
This has resulted in increased mortgage payments for some individuals whose cheaper agreements have expired.
By the end of 2026, the mortgage payments of one million individuals will increase by more than £500 per month, according to the Bank.
Mr. Quinn forewarned that “more mortgage customers are expected to roll off fixed-rate deals in the next six months, and additional rate increases are anticipated, so difficult times lie ahead.”
“We are acutely aware of the day-to-day financial challenges that some of our customers face, but we have seen few signs of stress in the mortgage book in the United Kingdom,” he added.
Despite the increase in profits, HSBC issued a warning about the uncertain economic outlook.
The Bank of England will raise interest rates again on Thursday, marking the fourteenth straight hike since December 2021.
The average two-year fixed mortgage rate approached 7% last month, a 15-year high.
In May, HSBC announced that the acquisition of SVB UK earlier in the year for a nominal £1 by the government and the Bank of England would add $1.5 billion to its profits.
