HSBC rules out banking crisis as profits triple, US$2bn buy-back

HSBC’s CEO has dismissed the idea of an impending banking crisis, attributing the collapse of four banks in six weeks to inadequate risk management rather than systemic issues. This comes as the bank’s own first-quarter profits tripled to $13 billion (£10 billion) following its rescue of Silicon Valley Bank UK.

Noel Quinn’s remarks were made the day after JP Morgan acquired the majority of the failing lender First Republic in a $10.6 billion takeover, as regulators aimed to put an end to the ongoing turbulence in the banking sector.

Quinn expressed satisfaction with the resolution of the First Republic situation during a conference call with journalists on Tuesday, stating, “We’re pleased that there was a resolution on the First Republic at the weekend so that that situation has been resolved.”

“We do not foresee a global banking crisis looming. While there are challenges faced by some regional banks in the US, we do not believe they are systemic within the US or across all banks,” stated the HSBC chief.

First Republic, catering to high net worth clients, is the fourth global bank to collapse since early March, following the failures of Silicon Valley Bank, New York-based Signature Bank, and Switzerland’s second-largest bank, Credit Suisse.

HSBC’s CEO attributed recent failures to banks taking higher risks to boost profits. He emphasized the importance of balancing risk appetite and return aspirations, stating, “Challenges usually emerge when the pursuit of profit outweighs a well-managed risk appetite, which is likely the lesson from SVB and some regional banks in the US.”

HSBC executives praised their own bank’s performance after reporting that profits had tripled to $12.9 billion in Q1 compared to $4.2 billion the previous year. The bank benefited from higher interest rates, which allow lenders to charge more for loans and mortgages, and the reversal of plans to write off $2.1 billion associated with the now uncertain sale of its French business. Profits were also boosted by approximately $1.5 billion due to the rescue of SVB UK in early March, which cost the bank only £1 billion.

Regarding SVB UK staff pay, the CEO confirmed that it would be impacted by the bank’s failure, after controversy over bonus payouts made to staff a day after the takeover. However, Quinn expressed his desire to ensure SVB UK employees have “good earnings potential going forward.”

“We’re supportive of them as a business, and we want them to have strong, long-term careers with HSBC,” he said.

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