- Lack of one-off items impacts earnings
- Profit excluding items beats forecasts
- Buyback programme renewed for 2025
Investors in global banking group HSBC (HSBA) looked through the 25% drop in reported earnings for the three months to March 2025 and focused instead on the full-year outlook along with a new $3 billion buyback programme.
The shares, which despite the volatility of recent weeks have gained more than 8% this year while the FTSE 100 has struggled to stay in positive territory, added a further 17p or 2% to 850p.
STRONG QUARTERLY PERFORMANCE
Profit before tax for the first quarter decreased by $3.2 billion to $9.5 billion, primarily due to the non-recurrence of $3.7 billion of gains reported in the same period last year related to the sale of the banking business in Canada and Argentina.
Excluding one-off items, however, profit increased by $1 billion to $9.8 billion, comfortably above market forecasts, helped by a strong performance in Wealth as well as debt, equity and foreign exchange trading, despite a rise in provisions for expected credit losses.
As a result, the annualised return on average tangible equity (ROTE) was 18.4% compared with an adjusted 16.4% in the same quarter last year.
Revenue excluding one-off items rose by 7% to $17.7 billion, while net interest income increased due to lower funding costs, the structural hedge against lower interest rates and a favourable shift in the bank’s asset mix.
Commenting on the numbers, chief executive Georges Elhedery said: ‘Our strong results this quarter demonstrate momentum in our earnings, discipline in the execution of our strategy and confidence in our ability to deliver our targets. We continue to support our customers through this period of economic uncertainty and market unpredictability, which we enter from a position of financial strength.’
MORE BUYBACKS
Acknowledging the ‘heightened uncertainty, in particular from protectionist trade policies’, which has created volatility in economic forecasts and financial markets, the bank maintained its full-year banking net interest income forecast of $42 billion and said it would continue to target a mid-teens ROTE between 2025 and 2027.
Analyst Joseph Dickerson at Jefferies flagged the fact profit topped expectations despite in-line net interest income, while looking forward the main impact of geopolitical tensions and tariffs was likely to be ‘muted’ demand for lending this year.
Yet, thanks to its strong balance sheet, HSBC announced a new share buyback of up to $3 billion to follow on from the previous $2 billion programme which ended this week.
