HSBC’s profits rise by 74%

HSBC’s profits rose by 74% in Q3 due to economic stability.

Q3 pre-tax profits of $5.4bn (£3.9bn) were recorded compared to $3.1bn (£2.2bn) at the same time last year, beating City forecasts of $3.8bn.

Continued global economic stability has enabled strong levels of debt repayment. Adjusted pre provision profit was down around 1% to $4.6bn on slightly lower revenues and costs however the group has now posted two consecutive quarters of adjusted net interest income growth which will benefit further should interest rates increase.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “HSBC is a giant in its industry, and with signs of more positive economic conditions comes a brighter set of results. Pre-tax profits have been buoyed by a huge swing in expected credit losses – with a chunky charge this time last year, turning into a release that buffer this quarter. The group is so confident about the direction of travel, it’s announced a $2bn share buyback programme.

“A CET1 ratio well above target risks looking like a waste of uninvested equity, and capital returns are one way to deal with that. However, a lack of available investment opportunities could be a potential concern for more growth minded investors.

“HSBC is the latest bank to hint at an expected hike in interest rates. This helps elevate the mood because higher interest rates improve the profitability of loans. All in, the picture is looking healthier for HSBC, but while interest rates remain on the floor, the group will continue to be held back. One thing the group has in its favour is a highly diversified business model, which means when one area struggles, another can pick up the slack. Both its sprawling geographical footprint, plus alternative banking activities, like consulting and trading businesses, means HSBC is in a more enviable position than others.”

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