On Tuesday morning, HSBC ($HSBA) experienced an increase of over 4% following robust revenue growth in the third quarter, resulting in an unexpected earnings surprise and the announcement of a larger-than-anticipated share buyback program. The British bank declared a third interim dividend of $0.10 per share, consistent with last year's dividend and market expectations.
Additionally, it proposed a share repurchase of up to $3 billion, surpassing the Visible Alpha consensus estimate of $2.75 billion. This new buyback program, slated for four months, follows a previous $3 billion repurchase initiated three months ago, bringing total distributions for the third quarter to $4.8 billion.
The increase in returns for shareholders stems from a profit attributable to ordinary shareholders of the parent company totaling $6.13 billion for the three months ending September 30, an increase from $5.62 billion in the prior year and above the consensus figure of $5.45 billion. HSBC attributes this growth to the rising demand for its wealth management products as well as activity in foreign exchange, equities, and global debt markets.
Revenue surged to $17 billion, up from $16.16 billion the previous year, defying forecasts of a drop to $16.04 billion from analysts surveyed by Visible Alpha. Meanwhile, RBC Capital Markets is closely monitoring what HSBC's management will communicate regarding the future path for banking net interest income, especially after it fell short of expectations and lagged behind the previous year's figures.
The banking net interest income (NII) was recorded at $10.6 billion, compared to $11.5 billion previously and the anticipated $10.74 billion. HSBC is forecasting banking NII of $43 billion for 2024. Similarly, net interest income of $7.64 billion fell below the consensus of $8.15 billion and the prior figure of $9.25 billion due to business disposals, increased interest expense on liabilities, and a loss related to the early redemption of legacy securities.
RBC remarked, "Following strong performance in 2023, we think the bank's earnings momentum has come to an end. HSBC's NII is negatively geared to falling rates, which are expected across HSBC's core geographies over 2024 and 2025. This headwind will be partially offset by hedging and balance sheet growth, but this growth is unlikely to be remarkable." Regarding the recently proposed modifications to its organizational and geographic strategy, Group Chief Executive Georges Elhedery stated, "HSBC is a highly connected, global business, and the plans we laid out last week aim to enhance our leadership and market share in competitive areas, deliver top-tier products and service excellence to our customers, and develop a simpler, more dynamic, and agile organization with clear accountability and quicker decision-making.
We will commence implementation of these plans immediately and will share more details in a business update with our full-year results in February." Price: $724.70, Change: $+33, Percent Change: +4.71%.