The financial giant HSBC reported on Wednesday that pre-tax earnings for the first half of 2024 totaled $21.6 billion, a marginal decline from the record-breaking performance of the previous year.
The company’s departing CEO, Noel Quinn, stated, “After delivering record profits in 2023, we had another strong profit performance in the first half of 2024, which is further evidence that our strategy is working.”
In addition, the bank increased the size of its share repurchase program, announcing a three-month extension of up to $3 billion after the $3 billion buyback announced in the previous quarter was finished.Â
Quinn stated in the announcement that the buyback and approval of an interim $0.1 per share dividend will bring shareholders a total of $4.8 billion, bringing the total amount of capital distributed since 2023 to $34.4 billion.
Even in an environment with reduced interest rates, “we remain confident that we can deliver attractive returns,” he continued.
Because of this, we are now projecting a return on average in the mid-teens for tangible equity in 2025, excluding the impact of noteworthy items.
Reduced sensitivity
An increase in interest rates earlier this year helped the lender with an emphasis on Asia and its competitors. After posting a record profit in 2023, pre-tax profit dropped by over 2 percent to $12.7 billion.Â
HSBC, which earns the majority of its revenue in Asia, has spent years focussing on the area in order to build its wealth business and target quickly growing markets.
Revenue increased by $400 million in the first half of 2024, mostly as a result of increased net interest income, the sale of its operations in Canada, Argentina, and France, and the purchase of Silicon Valley Bank’s UK division.
CEO Quinn stated, “Although we expect a cautious approach, we have reduced our sensitivity to interest rates.” He also mentioned that “as we look ahead, the path of interest rates and the outcomes of elections are among the factors that will shape the global operating environment.”
He underlined that by diversifying its revenue streams, especially in Asia’s wealth management industry, which has drawn $32.4 billion in new investment assets, the business has reduced the risks associated with interest rate reductions.
Quinn’s Final Diligence
According to HSBC, Georges Elhedery, CFO, will take over as CEO in September. Following a 37-year career, Quinn, 62, said of his tenure, “I want to place on record what an enormous privilege it has been to lead this great institution,” in his most recent interim report.
Quinn oversaw a dramatic turnaround of the London-based bank during his nearly five years as CEO, increasing earnings through interest rate increases and expense reductions.
He carried out a significant reorganization following the epidemic, eliminating thousands of positions to focus on HSBC’s most lucrative areas, which include Asia and the Middle East. Due to bad debts associated with Russia’s invasion of Ukraine, profits had decreased, but they eventually increased as international banks hiked interest rates to fight inflation.
Quinn also halted a breakup plan by key shareholder Ping An, which suggested spinning off its Asia assets, a move that shareholders ultimately rejected.
This incident highlighted how precarious HSBC is in the face of US-China relations and raised concerns about its capacity to operate both East and West.
Quinn stated in his farewell letter, “My goal was to maintain our standing financially when I started this job. Working together, I believe we have accomplished this and established a solid foundation for growth.”
