Our strong first-quarter performance provides further evidence that our strategy is working.
- Reported profit before tax of $12.9bn – up $8.7bn vs 1Q22
- That figure includes a gain of $2.1bn from reversing an impairment related to the planned sale of our French retail operations...
- And a provisional gain of $1.5bn from the purchase of Silicon Valley Bank (SVB) UK
- Revenue increased by 64%, or 74% on a constant currency basis, vs 1Q22
- We intend to initiate a new share buyback of up to $2bn, which we expect to commence shortly
- Expected credit losses (ECL) and other credit impairment charges of $0.4bn, down $0.2bn, reflect an improved outlook for the economy
- Annualised return on tangible equity (ROTE) of 27.4%, or 19.3% excluding the impact of our acquisition of SVB UK and the reversal of the French retail sale impairment
“We’ve announced a strong set of results for this quarter. It’s further proof that our strategy is working. Our profits were spread across our major geographies, our three global businesses performed well, and we kept a good grip on costs.
“We remain focused on continuing to improve our performance and maintaining tight cost discipline. And we’re investing in growth – we saw an opportunity to do that with our acquisition of SVB UK.”
Noel Quinn, HSBC Group Chief Executive
2 May 2023
We remain confident of achieving our ROTE target of at least 12% for 2023 onwards, excluding the impact of material acquisitions and disposals.
We remain highly focused on maintaining cost discipline. Our 2023 target is to keep cost growth to approximately 3%, adjusted for currency effects and one-time items. Our acquisition of SVB UK, and the related investments internationally, are expected to add approximately 1% to the Group‘s operating expenses.
Based on the current market consensus for global central bank rates, our net interest income expectations of at least $34bn in 2023 are unchanged. That figure is adjusted down by approximately $2bn to accommodate our implementation of IFRS 17 ‘Insurance Contracts’.
While the interest rate outlook remains positive, we expect continued pressure from an increase in money being moved into fixed-term investments as interest rates rise.
Our approach to planning ECL charges remains unchanged, given current macroeconomic uncertainty. We continue to use a range of 30bps to 40bps of average loans for planning our ECL charges over the medium to long term. We are maintaining the guidance provided at our full-year 2022 results of around 40bps of average gross loans in 2023 (including lending balances transferred to held for sale).
In November 2022, we agreed the sale of our business in Canada. We continue to classify this business as held for sale, but now expect the transaction to complete in 1Q24. Once complete, we remain committed to delivering a special dividend of $0.21 per share in 1H24. The remaining proceeds will accrue into common equity tier 1 capital, and we intend to use excess capital to supplement share buybacks.
A number of notable items contributed to a combined gain of $3.6bn in profit before tax this quarter. They include the reversal of the impairment relating to the planned sale of our retail banking operations in France and the acquisition of SVB UK in March.
Our 1Q23 annualised return on tangible equity of 27.4% includes the impact of these two announcements.
From 1 January 2023, we adopted the IFRS 17 ‘Insurance Contracts’ accounting standard, which replaced IFRS 4. The impact of that change was a $2.2bn reduction in net interest income and a $0.5bn reduction in FY22 profit before tax. All prior periods have been restated to allow for comparison.
We no longer report adjusted performance with significant items excluded.