ii view: HSBC proves ability to return lots of cash to shareholders

Third-quarter results to 30 September

• Revenue up 40% to $16.2 billion (£13 billion)
• Pre-tax profit of $7.7 billion (£6.2 billion), up from $3.2 billion
• Capital cushion or CET1 ratio of 14.9%, up from 14.7% in late June
• Third interim dividend of 10 US cents per share 
• New share buyback programme of up to $3 billion (£2.4 billion)

Chief executive Noel Quinn said:

“We have had three consecutive quarters of strong financial performance and are on track to achieve our mid-teens return on tangible equity target for 2023. There was good broad-based growth across all businesses and geographies, supported by the interest rate environment.”

• Invest with ii: Top UK Shares | How to Start Trading Stocks | Open a Trading Account

ii round-up:

Founded in 1865 in Hong Kong and now headquartered in London, HSBC Holdings (LSE:HSBA) serves around 39 million customers in over 60 countries and territories worldwide. 

It operates across the three arenas of Wealth and Personal Banking, Commercial Banking, and Global Banking and Markets.

For a round-up of these latest results announced on the 30 October, please click here.

ii view:

HSBC is one of the world’s largest banking and financial services organisations. Its stock market value of around £118 billion stands comfortably ahead of UK headquartered rivals Lloyds Banking Group (LSE:LLOY), Barclays (LSE:BARC) and NatWest Group (LSE:NWG), all at under £30 billion. Almost four-fifths of its profit came from Asia in 2022. 

Current strategic pushes include upping its investment in technology, transitioning to a net zero carbon company and reshaping its business portfolio, including planned sales in France and Canada and previous sales in Greece and Oman. Acquisitions include the UK business of failed US Silicon Valley bank SVB in March 2023 and Citigroup’s retail wealth management portfolio in mainland China. 

For investors, property related stresses in China and difficulties caused for rivals such as Standard Chartered (LSE:STAN) cannot be ignored. Elevated costs in relation to staff pay and required technology investments have been a hindrance. Some geographical diversity is being lost as it focuses on regions of strength, while elevated geopolitical tensions, particularly between China and the West, continue to warrant consideration.  

• World’s biggest dividend stocks in Q3 2023
• Where to invest in Q4 2023? Four experts have their say
• The Income Investor: two dividend stocks with capital growth potential

More favourably, investment now in technology and digital services should bring reward further down the line. Bad debt provisions for potential challenges in China are being made, there's an ongoing broad focus on cost containment persists, while the bank’s balance sheet remains robust.  

On balance, and while some caution remains sensible given Chinese uncertainties, continued share buybacks and a forecast dividend yield of over 8% is likely to keep income investors happy.   

Positives: 

• Robust balance sheet
• Attractive dividend yield (not guaranteed)

Negatives:

• Uncertain economic outlook
• Heightened political tensions between the West and China

The average rating of stock market analysts:

Buy