Banking behemoth HSBC has disclosed a substantial profit increase of $4.5bn (£3.7bn) for the latest quarter, attributing the growth to the beneficial impact of rising interest rates.
The firm reported that its pre-tax profits soared to $7.7bn in the third quarter, a significant jump from the $3.2bn recorded in the same period the previous year. Alongside this financial growth, HSBC announced its intention to initiate a $3bn share buyback program.
The bank experienced an increase in its net interest margin, which reached 1.7pc, marking a 19 basis point rise from the previous year. The net interest margin represents the disparity between the average rates of lending and deposit.
Noel Quinn, the Chief Executive Officer, commented, “We have witnessed three consecutive quarters of robust financial performance.”
Despite these positive results, the outcome fell short of analysts’ expectations, which had predicted pre-tax profits to hit around $8.1bn. Additionally, while the net interest margin showed improvement from the previous year, it experienced a slight decrease when compared to the second quarter of the current year.
Joe Dickerson, an analyst at Jefferies, highlighted that the increased expenditures on technology and performance-related payouts could stir controversy. He noted that costs are “likely to be the controversy” following these financial decisions.
On Monday, HSBC hinted at the possibility of raising bonuses before the year concludes. Quinn, in a conversation with Bloomberg TV, mentioned, “We have signalled, potentially in the fourth quarter because of the very strong trading performance of the business, we may well top up our variable pay by an extra 1pc, or $300m.”
This statement comes just as the UK is preparing to abolish the cap on bankers’ bonuses. The Bank of England confirmed last week that, starting from the end of October, bonuses would no longer be restricted to twice the annual salaries, a move aimed at boosting competitiveness and attracting top-tier talent.
