HSBC Q1 Pre-tax Profit Beats Expectations

HSBC Holdings said on Tuesday its profit tripled in the first quarter, beating expectations, as rising interest rates boosted the lender's income and helped it pay a first quarterly dividend since 2019.

The strong results of HSBC and its Asian rival DBS underscore the boost to their balance sheets from aggressive policy tightening, even though it has brought banking sector turmoil, chiefly in the US. On Monday, regulators seized First Republic Bank and sold its assets to JPMorgan Chase & Co, in a deal to resolve the largest US bank failure since the 2008 financial crisis and draw a line under the bank sector jitters.

With the rate cycle nearing a peak, the challenge for the likes of HSBC, Europe's largest bank, and DBS will be to sustain their margins this year and beyond.

HSBC CEO Noel Quinn said the results showed its strengths in a rising rate environment, and played down the risks of further contagion for the banking sector.

"We do not believe there is a global banking crisis on the horizon. We do not see a negative impact on our business" as a consequence of First Republic Bank's rescue," Quinn told a conference call.

HSBC posted a pre-tax profit of US$12.9 billion for the quarter ended March, versus US$4.2 billion a year earlier.

The profit was much higher than the US$8.64 billion average estimate of 17 analysts compiled by the bank.

Hong Kong shares of HSBC rose 3.3 percent in afternoon trading.

The strong performance enabled HSBC to announce its first quarterly dividend since 2019, a return of US$0.1 per share, and a share buy-back of up to US$2 billion.

HSBC's headline profit was boosted by a reversal of a US$2 billion impairment it took against the planned sale of its French business, reflecting the fact that the deal may not go through.

It had warned last month that its France disposal could be in jeopardy over regulatory capital concerns for the buyer.

The London-headquartered bank also reported a delay in the time frame for the completion of the sale of its Canada business, a key part of its strategy to shrink in slow-growing Western markets where it lacks scale.

The bank said the planned US$10 billion sale, originally slated to be completed by the end of this year, will now only likely go through in the first quarter of 2024.

"Our strong first quarter performance provides further evidence that our strategy is working," Quinn said.

"Our profits were spread across our major geographies, and all three global businesses performed well as we continued to meet our customers' needs through our internationally connected franchises."

Meanwhile, pressure has been mounting on HSBC since its largest shareholder, Chinese insurer Ping An, called for the bank to break up its business as part of a "strategic restructuring" to unlock shareholder value.

The company has urged its shareholders to vote down the proposal at its annual general meeting in Birmingham scheduled for Friday. (AFP/Reuters)