London August 1 2023: HSBC Holdings Plc Reported profit after tax increased by USD 9.1 billion to USD 18.1 billion as interest rate rises, according to bank filing to the exchange.
Profit before tax rose by USD 12.9 billion to USD 21.7 billion. This included a USD 2.1 billion reversal of an impairment relating to the planned sale of our retail banking operations in France and a provisional gain of USD 1.5 billion on the acquisition of Silicon Valley Bank UK Limited (‘SVB UK’). On a constant currency basis, profit before tax increased by USD 13.3 billion to USD 21.7 billion. Reported profit after tax increased by USD 9.1 billion to USD 18.1 billion.
Given the current market consensus for global central bank rates, Bank raised its 2023 full-year guidance for net interest income to above USD 35 billion. While the interest rate outlook remains positive, we expect continued migration to term deposits as short-term interest rates rise.
“We have delivered a strong first half performance and are confident of achieving our revised mid-teens return on tangible equity target in 2023 and 2024. There was good broad-based profit generation around the world, higher revenue in our global businesses driven by strong net interest income, and continued tight cost control. I am also pleased that we can reward our shareholders with a second interim dividend of USD 0.10 per share and a second share buy-back in 2023 of up to USD 2 billion, with substantial further distribution capacity still expected ahead.
There is still much work to do, especially given the many challenges in the global economy, but I am confident about the future as we move further into the next phase of our strategy and focus on opportunities to drive value creation, diversify our revenue and retain tight cost control” Noel Quinn, Group Chief Executive, said.
Revenue increased by USD 12.3 billion to USD 36.9 billion. The increase was driven by higher net interest income in all of our global businesses due to interest rate rises. It also included the impacts related to the planned sale in France and the acquisition in the UK. On a constant currency basis, revenue rose by USD 13.2 billion to USD 36.9 billion.
Net interest margin (‘NIM’) of 1.70% increased by 46 basis points (‘bps’).
Expected credit losses and other credit impairment charges (‘ECL’) of USD 1.3 billion reflected a more stable outlook in most markets, although inflationary pressures remain. The 1H23 charge included USD 0.3 billion relating to the commercial real estate sector in mainland China and charges in Commercial Banking (‘CMB’) in the UK. The 1H22 charge of USD 1.1 billion reflected heightened economic uncertainty, mainly due to the Russia-Ukraine war and inflationary pressures, and also included USD 0.3 billion relating to the commercial real estate sector in mainland China, partly offset by releases of Covid-19-related allowances.
Operating expenses of USD 15.5 billion were USD 0.7 billion or 4% lower than in 1H22, primarily due to lower restructuring and other related costs following the completion of our cost-saving programme at the end of 2022 and from a USD 0.2 billion impact from a reversal of historical asset impairments. This was partly offset by higher technology costs, an increase in performance-related pay, severance of USD 0.2 billion in 1H23 and the effects of rising inflation. Target basis operating expenses rose by 4.3%.
Customer lending balances increased by USD 36 billion since 31 December 2022. On a constant currency basis, lending balances grew by USD 23 billion, mainly due to the reclassification of balances associated with our retail banking operations in France from held for sale during the period, and USD 7 billion of additional balances following our acquisition of SVB UK during 1Q23. These were partly offset by the reclassification of our business in Oman as held for sale, which resulted in a USD 3 billion reduction. Excluding these factors, customer lending fell, reflecting weaker customer demand for wholesale lending, notably in Hong Kong and Europe.
Customer accounts increased by USD 25 billion since 31 December 2022. On a constant currency basis, customer accounts increased by USD 3 billion, mainly due to the reclassification of balances associated with our retail banking operations in France from held for sale during the period. In addition, our acquisition of SVB UK resulted in growth of USD 7 billion, and in 1H23, we reclassified our business in Oman as held for sale, resulting in a USD 5 billion reduction. Excluding these factors, deposits fell, reflecting reductions in Wealth and Personal Banking (‘WPB’) and CMB in HSBC UK, as well as in Global Banking and Markets (‘GBM’).
Annualised return on average tangible equity (‘RoTE’) of 22.4% compared with 10.6% in 1H22. Excluding the annualised impacts related to the planned sale in France and the acquisition in the UK, annualised RoTE was 18.5%.
Common equity tier 1 (‘CET1’) capital ratio of 14.7% increased by 0.5 percentage points compared with 4Q22, which was driven by capital generation net of the dividend accrual, and included an approximately 0.3 percentage point impact from the reversal of an impairment on the planned sale of our retail banking operations in France and the provisional gain on the acquisition of SVB UK. This was partly offset by increased risk-weighted assets (‘RWAs’) and the impact of the share buy-back announced with our 1Q23 results in May 2023.
The Board has approved a second interim dividend of USD 0.10 per share. We also intend to initiate a further share buy-back of up to USD 2 billion, which we expect to commence shortly and complete within three months.
