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HSBC announced a $3 billion share buyback after the bank’s profits in its final financial results under Chief Executive Noel Quinn beat analysts’ expectations by a wide margin.
The U.K.-based lender reported pre-tax profit of $8.9 billion, up from $8.8 billion a year ago and beating analysts’ expectations of $7.8 billion.
Chief Financial Officer Georges ElHedery will succeed Quinn, who has led the bank for five years, in September. The bank said on Wednesday that financial controller John Bingham would take on the role of interim CFO.
“I’ve always been very proud of the bank’s heritage and the strategic role it plays in the world,” Quinn said on Wednesday. He added that he is “confident we have the right strategy and model to grow earnings in a low interest rate environment.”
The $3 billion share buyback is the latest in a series of bounties HSBC shareholders have received in recent years, including multiple share buybacks and increased dividends. The company on Wednesday declared an interim dividend of 10 cents a share.
But Quinn’s comments on interest rates highlight the challenge his successor, El Hedery, will face in the job. Under Quinn, the bank has benefited greatly from rising interest rates, but those benefits are starting to fade as the central bank tries to rein in inflation.
HSBC’s net interest income fell $1.4 billion to $16.9 billion in the first half of this year, and its net interest margin, a key measure of a bank’s lending profits, fell to 1.62% from 1.7% a year ago. More than half of HSBC’s $66 billion in revenue last year came from net interest income.
As interest rates rise, the gap between what they can charge borrowers and what they have to pay for financing widens, boosting banks’ profits.
HSBC said its asset management business, which includes life insurance and private banking, was the “main driver” of the revenue increase, adding that profits rose in its “home markets” of Hong Kong and the UK.
The bank’s return on tangible equity, a measure of profitability, fell to 21.4 percent in the first half of this year from 22.4 percent in the same period last year.
The company reported second-quarter expenses of $8.1 billion, up 3 percent from a year earlier, partly due to rising technology costs and inflation.
El Hedery’s main tasks as chief executive will include controlling costs, promoting growth in businesses that are less dependent on interest rates and navigating a complex geopolitical situation amid ongoing tensions between the United States and China.
Although the bank is based in Britain, Hong Kong is by far its largest source of revenue and it relies on the United States for its crucial dollar-clearing licence.
The bank said Bingham would take on the role of interim chief financial officer from September in addition to his current role. He joined HSBC in 2020 after spending 20 years at KPMG. El Hedery said Bingham has “exceptional knowledge and expertise in accounting and regulatory matters.”
Rival Standard Chartered Bank on Tuesday announced a $1.5 billion share buyback, the largest in its history, after seeing rising profits from its asset-management business.
