The start of 2022 has demonstrated good growth and momentum across most parts of the Group.
- All regions continued to be profitable in the first quarter. Asia made $2.8bn and HSBC UK $1.2bn in reported profit before tax
- Expected credit losses and other credit impairment charges (‘ECL’) of $0.6bn notably reflected the direct and broader economic impacts of the Russia-Ukraine war and inflationary pressures
- Good cost discipline led to lower operating expenses even as we invested more in technology
- Net interest income grew by $0.5bn year-on-year to $7.0bn. The net interest margin rose for the first time since 2020
- The fall in reported profit was driven by a combination of weak equity markets, higher ECL charges and Covid-19 restrictions in Hong Kong
- We’ve completed the $2bn share buyback we announced with our 3Q 2021 results; we intend to launch our further buyback of up to $1bn following our AGM on Friday 29 April
“I’m encouraged by our start to the year. Our strategy is on track, with organic growth and good momentum across most parts of the Group. While profits were down on last year’s first quarter due to market impacts on Wealth revenue and a more normalised level of ECL, higher lending across all businesses and regions, and good business growth in personal banking, insurance and trade finance bode well for future quarters.
“Although the economic outlook remains uncertain, the continued upward path of interest rates since our full year results has further strengthened our confidence in delivering a double-digit return on average tangible equity in 2023.”
Noel Quinn, HSBC Group Chief Executive
26 April 2022
We had strong underlying volume growth across many parts of our businesses, and lending rose in every global business and region.
In Commercial Banking, adjusted revenue rose 9% with continued good fee income growth. Global Liquidity and Cash Management (GLCM) and Global Trade and Receivables (GTRF) were stand-out performers with trade balances up by $12bn compared with the first quarter last year.
New business levels in insurance were equivalent to the pre-pandemic period, thanks in part to our digital innovations, even as Covid-19-related restrictions affected Hong Kong branches.
Our reported net interest income (NII) rose by 7%, as a result of rising interest rates and balance sheet growth. An improved interest rate outlook is expected to lead to further NII growth going forward.
Adjusted profit before tax by region, 1Q22 ($bn)
In Hong Kong, we were the first bank to gain approval to offer remote, branch-like sales and services. The value of new business for insurance in Hong Kong rose by 20% from a year earlier.
Globally, our Personal Banking adjusted revenues increased by 7% from a year ago, benefiting from rate rises and balance sheet growth.
We aim to manage a common equity tier 1 (CET1) ratio within a range of 14-14.5% in the medium term. Its decline in the quarter mainly reflects regulatory changes and adverse fair value movements on our treasury portfolio.
We’re working hard to implement our earlier sustainability announcements, which commit the Group to publishing a Climate Transition Plan next year and a science-aligned phase down of fossil fuel financing.
This strategic direction includes facilitating the transition to net zero emissions for our clients. We’re currently in the top three of the largest underwriters of green, social and sustainability bonds globally with a market share of 6.2%.
The revenue outlook remains positive, with growth in net interest income expected to continue as implied market consensus policy rate movements have improved since our full year 2021 results.
While Covid-19-related restrictions in Hong Kong and mainland China resulted in a comparatively muted quarter for our Wealth business, we expect a recovery when restrictions are lifted.
The Russia-Ukraine war has exacerbated inflationary pressures, and increased uncertainty on the forward economic outlook, contributing to higher ECL charges for the quarter.
We are monitoring developments closely, although we continue to expect ECL charges to normalise, based on current consensus economic forecasts and default experience.
We continue to expect a return on average tangible equity of at least 10% in 2023.
Despite a tougher set of operating conditions this quarter, we remain very focused on getting back to double digit returns in 2023.