HSBC announces $2 bln buyback as rate hikes boost H1 profit

Investing.com -- HSBC Holdings PLC (HK:0005) (LON:HSBA) announced a $2 billion buyback on Tuesday as the lender logged a higher profit and revenue for the first half of 2023, aided chiefly by stronger margins amid rising interest rates. 

The Asia-focused lender said its profit before tax jumped to $21.7B from $8.78B in the six months to June 30. This was accompanied by $36.88B in revenue, which rose from the $24.55B seen last year, and also beat Reuters estimates of $31.99B.

The strong performance was driven chiefly by increased net interest income and improved margins, HSBC said in a statement on Tuesday.   

The $2B buyback will begin immediately, HSBC said, and will be completed within three months. The move comes after the bank announced a similarly valued buyback in May, on strong first-quarter earnings.

HSBC saw a strong rise in earnings this year as rising interest rates boosted its net interest margin. The figure rose 46 basis points to 1.70% in the second quarter.

The bank also hiked its 2023 net interest income outlook to over $35B, with the rate outlook remaining positive for the remainder of the year. The bank logged net interest income of $18.26B for the first six months of 2023, compared to $13.38B from last year.

“While the interest rate outlook remains positive, we expect continued migration to term deposits as short-term interest rates rise,” the bank said in a statement. 

The strong results signal improved prospects for HSBC, as it moves to sell off several of its underperforming units and pivot its focus to Asia, its biggest market. 

The bank is in the process of selling its Canadian operations, and is also reportedly considering exiting 10 other countries in Europe and Asia.

HSBC’s large buybacks are also intended to placate major shareholders, specifically China’s Ping An Insurance (SS:601318) (HK:2318), which has been calling for the bank to streamline its operations and potentially split its Asian business.