HSBC, Europe’s largest lender, announced a fresh share buyback program worth up to $3 billion on Tuesday, following its third-quarter earnings report, which surpassed analyst expectations. The strong financial performance was driven by robust revenue growth and gains in the bank’s wealth and personal banking divisions.
For the third quarter, HSBC reported a pre-tax profit of $8.5 billion, beating analysts’ estimates of $8 billion, according to LSEG SmartEstimate, a metric that prioritizes forecasts from consistently accurate analysts. This represents a 10% increase compared to the $7.71 billion posted in the same quarter last year. After-tax profit for the quarter was $6.7 billion, which is $500 million higher than in the third quarter of 2023.
Revenue for the quarter reached $17 billion, exceeding analysts’ expectations of $16.2 billion and marking a 5% increase compared to the $16.2 billion reported in the same period last year. HSBC’s strong performance was primarily attributed to the success of its wealth management and personal banking units.
In addition to the $3 billion share buyback announced for the third quarter, HSBC has now committed to repurchasing a total of $9 billion in shares this year. The bank had already announced $3 billion share buyback programs in both the first and second quarters. HSBC’s board also approved a third interim dividend of $0.10 per share.
Despite the strong earnings and share buyback, HSBC saw its net interest margin, a key measure of lending profitability, fall by 24 basis points to 1.46%, down from 1.70% a year ago. This figure was also lower than the 1.56% predicted by brokers. The decline reflects the broader challenges in the banking sector as rising interest rates impact profitability. However, basic earnings per share for the quarter increased to 34 cents, up from 29 cents in the same period last year.
The earnings report follows a significant strategic shift by HSBC. Last week, the bank announced plans to restructure into four major business units: Hong Kong, the U.K., international wealth and premier banking, and corporate and institutional banking. This reorganization, set to take effect in January, is part of an effort to streamline operations and reduce duplicated processes, making the bank more agile and efficient. HSBC also appointed its first female finance chief as part of this overhaul.
CEO Georges Elhedery highlighted the importance of these changes, stating that the restructuring will result in “a simpler, more dynamic, and agile organization” that is better positioned to meet future challenges.
