HSBC Doubles Profits as Interest Rates Soar

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Facts

  • On Tuesday, HSBC announced its pre-tax profits more than doubled in the first half of 2023 — from $8.7B in 2022 to $21.7B this year — amid heightened interest rates around the world.1
  • In the second quarter, Europe's biggest bank nearly doubled profits — from $4.1B to $8.8B — while its revenue rose by $4.5B to $16.7B. It now projects a return on tangible equity, a key measure of profitability, "in the mid-teens for 2023 and 2024."2
  • The reversal of a $2.1B impairment — related to the planned sale of its retail banking operations in France — as well as its $1.5B gain on acquisition of Silicon Valley Bank UK, reportedly contributed to the drastic revenue and profit increases.3
  • While European and US banks struggled to generate profits in the investment banking sector, HSBC's profits rose 16%. However, near-40% gains in commercial banking and retail and wealth management were the biggest driver of HSBC's gains.4
  • Due to its robust performance, the London-based lender said it would disburse an additional $2B in dividends, worth up to $0.10 per share, and conduct a $2B stock buyback, while also paying its staff an extra $200M in performance-related bonuses.5
  • However, HSBC has been accused of "making hay" out of the high-interest rates "while still offering little to loyal savers," especially mortgage-paying homeowners.6

Sources: 1BBC News, 2CNN, 3CNBC, 4Reuters, 5Guardian, and 6Sky News.

Narratives

  • Left narrative, as provided by Isle of Wight County Press. While ordinary citizens are trying to navigate bloated mortgage payments and a rising cost of living, HSBC and its fat cat bankers are profiteering like bandits. There is an apparent problem with the current economic structure if a multibillion-dollar bank can double its profits while doing nothing to help its customers. Regulators must step in to make sure that HSBC passes down its earnings to its struggling consumers.
  • Right narrative, as provided by GB News. Despite ongoing criticism of HSBC, it's the first bank in the UK to have cut mortgage rates despite the rising interest rates. While some may want to demonize all banks, especially the largest and most successful ones, it's unfair to say that HSBC is not doing anything to help customers save money. As a business the bank is, of course, out to make money, but it's doing its best to balance its financial obligations to shareholders while helping out savers.

Predictions