The UK-based global bank HSBC Holdings PLC (GB:HSBA) today reported more than double net profits in its Q3 2023 earnings report and also reaffirmed its full-year outlook. The pre-tax profit of $7.7 billion was significantly higher than the $3.2 billion reported a year ago. The bank, however, missed analysts’ forecasts of $8.1 billion as it continued to struggle with rising costs.
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The bank’s revenue increased by 40% to $16.2 billion in the third quarter, well-supported by the high interest-rate income across its global businesses. The NIM (net interest margin) grew by 19bps in Q3 to 1.7%, as compared to the same quarter of 2022. In terms of outlook, the bank expects net interest income to be above $35 billion for the full year 2023.
The bank’s operating expenses increased by 2% to $8.0 billion, compared to the third quarter of 2022. This was due to higher technology costs, increasing inflation, and the accruals for performance-related pay. However, these were partially offset by reduced restructuring and other associated costs, thanks to the bank’s cost-saving program. For the full year, it anticipates an increase of 1% in its operating expenses.
Talking about shareholders’ returns, HSBC announced an additional share buyback, totaling up to $3 billion, bringing the year’s total to $7 billion. The bank credited its continued growth to the positive impact of higher interest rates, marking this as its third consecutive quarter of “strong financial performance.” The bank also approved a dividend of $0.10 per share in its results.
The HSBC share price is trading up by 1.01% today after the result announcement. Year-to-date, the stock has gained over 20%.
Is HSBC Holdings a Good Stock to Buy?
Post-results, analyst Joseph Dickerson from Jefferies reiterated his Buy rating on the stock today, forecasting a growth rate of 65% in the share price. Dickerson stated that the share buyback was bigger than his expectations, but also believes that the higher costs will remain a concern for the bank.
UBS analyst Jason Napier also maintained his Hold rating on the stock with a prediction of a 7.25% upside in the price.
According to TipRanks consensus, HSBA stock has received a Moderate Buy rating based on seven Buy, four Hold, and one Sell recommendations. The HSBC share price target is 793.08p, which is 35% above the current trading level.
