The net interest margin party is not over for every big bank in the FTSE 100 lot.
HSBC Holdings PLC (LSE:HSBA)’s third quarter was a strong one in most respects, with revenues increasing 40% yearly to $16.2 billion and pre-tax profit rising by $4.5 billion to $7.7 billion (though this was partially due to a 2022 impairment hit).
These bumper revenues were in no small part thanks to a net interest margin (NIM) of 1.7%.
A two-basis-point quarter-on-quarter dip it may have been, but a negligible one compared to NatWest Group PLC (LSE:NWG)’s 12bps quarterly contraction and Lloyds Banking Group PLC (LSE:LLOY)’s 6bps contraction.
In fairness, this is far from an apples-to-apples comparison.
Focusing purely on UK results shows that HSBC is suffering the same fate as its domestic competitors, with heightened competition from challenger banks and political pressure to support savers causing an 8bps fall in UK NIMs.
But HSBC’s Asia focus – when 46% of net interest income was sourced in the third quarter – bade well for the Hong Kong-registered entity.
HSBC Hong Kong’s margins actually improved by 2bps against the second quarter, likely to due lower passthrough rates compared to the UK and a higher central bank rate imposed by the Hong Kong Monetary Authority- 5.75% compared to 5.25% in the UK.
Despite the HKMA maintaining a 5.75% base rate in September, HSBC ruled out increasing its best lending rate for savers, all the while hiking mortgage rates for borrowers.
For better or worse, HSBC’s Asia exposure was a boost to firm-wide profits this quarter, and shareholders are celebrating a $3 billion buyback as a result.
There is one key impetus behind the bank’s hawkish approach to margin passthrough and these generous shareholder returns.
Chief executive Noel Quinn said he hoped activist investor Ping An “will be pleased” with today’s earnings call and buyback pledge.
Chinese conglomerate and HSBC’s largest shareholder Ping An has been pressuring HSBC to improve shareholder returns and cut costs, while also calling for the carving out of the bank’s Asia-focused business segment.
Neither management nor the majority of shareholders want that and have since hit back at Ping An’s aggressive actions.
Quinn is probably hoping that today’s results will put Ping An’s activism on the back burner, at least in the short term.