HSBC, Europe’s largest bank, reported robust financial results for the third quarter of 2023, with a profit after tax of $6.26 billion. This figure represents an impressive 235% increase compared to the same quarter in the previous year. The strong performance was primarily underpinned by the prevailing higher interest rate environment.

HSBC’s profit before tax for the third quarter reached $7.7 billion, reflecting a significant increase of $4.5 billion from the previous year. This positive momentum was mainly attributed to the favorable interest rate conditions. Despite this strong performance, the reported numbers fell slightly short of economists’ expectations, who had projected a Q3 profit after tax of $6.42 billion and a profit before tax of $8.1 billion.

HSBC acknowledged that the increase in its Q3 profit was influenced by a $2.3 billion impairment recorded in the same period in 2022. This impairment was related to the planned sale of the bank’s retail banking operations in France. Of this amount, $2.1 billion was reversed in the first quarter of 2023, reflecting increased uncertainty about the completion of the transaction. The bank indicated its intention to reclassify these operations as “held for sale” in the fourth quarter of 2023, at which point the impairment would be reinstated.

In the third quarter, HSBC reported a notable surge in revenue, reaching $7.71 billion compared to $3.23 billion in the same quarter a year ago. The higher interest rate environment played a significant role in driving this revenue growth, contributing to an increase in net interest income across all global business segments. The net interest margin (NIM), a key measure of lending profitability, rose to 1.7%, surpassing expectations of 1.68%. However, NIM experienced a slight two-basis-point decline compared to the previous quarter, largely due to customers shifting their deposits to term products, particularly in Asia.

In light of the strong financial performance, HSBC’s board approved a third interim dividend of 10 cents per share. The bank also announced a share buy-back program of up to $3 billion, set to commence shortly and expected to be completed by the full-year results announcement on February 21, 2024. Group CEO Noel Quinn expressed the bank’s commitment to rewarding shareholders, highlighting that they have announced three share buybacks in 2023, totaling up to $7 billion, alongside three quarterly dividends totaling $0.30 per share. This underscores HSBC’s substantial distribution capacity while continuing to invest in growth.

HSBC anticipates that the share buyback program will impact its common equity tier 1 capital ratio (CET1 ratio) by 0.4 percentage points. The CET1 ratio is a key measure of financial resilience for European banks. Looking ahead, HSBC plans to reduce its CET1 ratio to a range of 14% to 14.5%, down from the current level of 14.9%. The bank also revealed a dividend payout ratio of 50% for 2023 and 2024, excluding any material notable items, underscoring its focus on delivering value to shareholders.