HSBC’s Quarter Earnings Leave Competitors in the Dust: Profit Nearly Doubles
- HSBC, the banking giant based in London, has reported that its profit in the last quarter nearly doubled due to the rising interest rates worldwide. The company has recorded a pre-tax profit of $5.2 billion for the last three months of 2022, up more than 90% from the same period of the previous year.
However, its profit for the whole year declined by $1.4 billion to $17.5 billion due to the cost of selling its French retail banking operations. HSBC is currently in the process of selling its Canadian business, and the bank intends to use the revenue from that sale to distribute payouts to its shareholders after the transaction’s completion. “Another good year” for HSBC, says the CEO Noel Quinn, adding that the company is “on track” to provide higher returns in 2023.
In June 2021, HSBC agreed to sell its French retail bank, and it now anticipates a loss of $2.4 billion linked to that transaction. Furthermore, in November, HSBC declared that it had agreed to sell its banking operations in Canada to the Royal Bank of Canada for 13.5 billion Canadian dollars ($10 billion; £8.3 billion), a deal that is expected to conclude in 2023.
Due to pressure from its main shareholder, the Chinese insurance company Ping An, HSBC has been selling off its businesses. Ping An has been calling for HSBC to split its Asia-based operations to increase profits since last year. In addition, HSBC has been cutting jobs in recent years to reduce expenses. As a result of the significant decline in customer footfall in the wake of the pandemic, the bank announced in November that it plans to close 114 more branches in the UK. While the bank has promised to seek alternative employment for the affected personnel, it has cautioned that roughly 100 employees will be made redundant. This is in addition to earlier branch closure announcements made in 2021 and 2022.
Furthermore, HSBC’s CEO, Mr. Quinn, hinted at the possibility of more job cuts in the future, stating that cost reduction measures will not be eased. He also added that the bank is considering up to $300 million in extra severance expenses for 2023. In recent months, central banks worldwide have raised interest rates in an attempt to control inflation. The Bank of England increased UK rates to their highest level in 14 years in December.
Similarly, the US Federal Reserve and the European Central Bank have significantly raised borrowing costs. UK MPs have raised concerns this month that the country’s major banks are not passing on higher interest rates to savers. In response, HSBC, Lloyds, NatWest, and Barclays’ UK chief executives have argued that the debate is focusing incorrectly on the interest rates offered on easy-access savings accounts, which typically yield a return of less than 1%.