San Francisco Frontiers - HSBC profit rockets on rising interest rates

Profit after tax almost quadrupled to $10.3 billion in the three months to March from a year earlier, UK-headquartered HSBC said, while also pouring cold water on talk of a global industry crisis.

The bank also benefitted from its reversal of a $2.1 billion writedown that had been linked to the planned sale of its French consumer banking activities to the US fund Cerberus.

That deal is now thought to be at risk of falling through.

HSBC shares rallied 5.5 percent in midday London deals on Tuesday, as the bank announced a stock buy-back worth up to $2 billion and issued a bright outlook.

The optimism came despite the move by US regulators on Monday to seize the lender First Republic and orchestrate its sale to JPMorgan Chase.

It was the latest government intervention after the recent collapse of Silicon Valley Bank (SVB) and the takeover of embattled Credit Suisse by its Swiss peer UBS.

- No crisis 'on horizon' -

"We do not believe there is a global banking crisis on the horizon," chief executive Noel Quinn told reporters Tuesday. "We do not believe it's global systemic issues."

He added that SVB UK, which HSBC acquired in March, was a "well run" business with a "good" quality loan book that was a "natural fit" for the group.

The acquisition had allowed HSBC to attract significant inflows, Quinn said.

Rising interest rates worldwide, aimed at fighting sky-high inflation, have weighed particularly heavily on the operations of midsize US banks, which have seen their financing costs surge.

But larger, well-capitalised banks have used their strength to reap bumper profits and revenues as they hike interest rates on loans, while at the same time offering more attractive returns on savings.

"In the US, particular turmoil has been felt lower down the food chain with the smaller and midsize banks," Richard Hunter, markets analyst at Interactive Investor, told AFP.

"By contrast, the larger banks on both sides of the pond have the financial strength to deal with such turmoil, which the smaller banks generally do not."

- 'Positively exposed' to rates -

HSBC said it was "positively exposed to rising interest rates" and forecast $34 billion in net interest income this year.

The bank also announced its first quarterly dividend since 2019 alongside the hefty share buy-back.

It comes after group revenue leapt 64 percent to more than $20 billion in the first quarter, while pre-tax profits more than tripled to almost $13 billion.

Pressure has been mounting on HSBC since its largest shareholder, the Chinese insurer Ping An, called for the bank to break up its business as part of a "strategic restructuring" to unlock shareholder value.

The bank has urged shareholders to vote down the proposal at its annual general meeting in the central English city of Birmingham on Friday.

HSBC axed 35,000 jobs during the Covid-19 pandemic to focus on its most profitable areas in Asia and the Middle East.

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T.Rivera--SFF