HSBC improves outlook, launches $2B buyback as rising rates improve income

HSBC Holdings elevated its key profitability target and declared a fresh $2 billion share buyback.

It was able to more than double its income for the first half of 2023 thanks to rising central bank interest rates around the world. HSBC increased its short-term return on tangible equity target from at least 12% from 2023 onward to nearly mid-teens for 2023 and 2024. For 2022, the bank forecasted a return on tangible equity of 9.9%.

Similar to its European and US rivals, HSBC’s results revealed a comparatively modest performance in its investment banking sector, where income rose 16% and outperformed by near-40% profits in the wealth management and commercial banking divisions.

That pointed to an environment where rising interest rates worldwide are boosting lending income while volatile markets and a global deal drought suppress revenues from trading and investment banking.

HSBC increased its forecast for net interest income in 2023 to more than $35 billion, up from $34 billion previously, though some analysts expected an upgrade closer to $36 billion.

With a $162 billion market value, Europe's largest bank reported a pretax profit of $21.7 billion for the first half of 2023, up from $9.2 billion in 2022 and exceeding the average forecast of $20.9 billion made by analysts.

The London-based bank announced an interim dividend of ten cents per share.

Before settling to be up 1.2% by 0625 GMT, HSBC's shares in Hong Kong soared as high as HK$66.70 ($8.55), their highest level since May 2019.

Its shares rose 2% in early trading in London, compared to a flat FTSE 100 benchmark index.