HSBC is to buy back up to $2bn of its stock in a bid to shore up investor support as its biggest shareholder Ping An ramps up criticism of the UK-based lender.
The bank’s pre-tax profits jumped to $12.9bn in the first three months of this year, more than three times the figure from a year earlier, paving the way for handouts to shareholders.
The surge in profits was partly due to a provisional gain of $1.5bn from its acquisition of the UK arm of collapsed lender Silicon Valley Bank in March.
HSBC also reversed $2.1bn of impairments linked to the planned sale of its French retail banking network to the private equity firm Cerberus. The bank warned last month that the deal, agreed in 2021, was in doubt because interest rate rises mean the private equity buyer will have to inject more capital.
HSBC also said it would return to making its dividend payouts every quarter, meeting a key demand of its Hong Kong investor base. It set the payout at 10 cents a share.
The lender is seeking the support of shareholders as Ping An, the Chinese insurer, agitates for an overhaul. Ping An, the bank’s largest shareholder, said last month it was “deeply concerned about HSBC”. It has spent the past year calling for the bank to spin off its Asian operations.
The results showed that HSBC was “delivering on our promises”, chief executive Noel Quinn said on Tuesday.
He added that HSBC and Ping An had a shared “desire to improve the performance of the bank” but a “difference of opinion” about restructuring it. The first-quarter results were evidence that the current approach was working, he said.
HSBC shares rose 4.2 per cent in Hong Kong after the buybacks and dividends were announced. The lender is due to face shareholders at its annual general meeting in the UK on Friday.
The bank’s revenues rose 64 per cent to $20.2bn, fuelled by higher interest rates.
Its net interest margin — the difference between the interest it receives from making loans and the rate it pays out to depositors such as savings account holders — rose to 1.69 per cent.
HSBC is one of the world’s largest deposit-taking institutions, making it particularly sensitive to interest rates.
The results were announced a day after the collapse of First Republic, the second-biggest bank failure in US history and the third time in less than two months that the US Federal Deposit Insurance Corporation had taken over a bank.
“We do not believe there’s a global banking crisis on the horizon,” Quinn said, adding he was “pleased there was a resolution” with JPMorgan Chase agreeing to buy most of First Republic’s business.
In March, HSBC bought SVB’s UK business for £1 in a fire sale agreed over a weekend of intense talks. It has since hired more than 40 commercial bankers who used to work at SVB.
“I was really pleased that we did the acquisition” of the SVB unit, Quinn said. HSBC plans to expand the unit in Hong Kong, elsewhere in Asia and potentially in Israel, he added.
Some Hong Kong shareholders had complained the SVB deal was too risky and that the bank was acting on the orders of the UK government, claims which chair Mark Tucker last month said were “completely wrong”.
Ping An, which holds about 8 per cent of HSBC’s shares, said last month that its spin-off proposal should be “adjusted to a strategic restructuring solution” in which HSBC would remain the controlling shareholder of a separately listed Asian bank.
Its year-long campaign has failed to garner support from any other major institutional shareholder.