HSBC’s profits for the first half of 2023 have more than doubled, reaching $21.7 billion (£16.9 billion), compared to $9.2 billion (£7.17 billion) during the same period last year. The surge in profits was primarily driven by soaring interest rates, a result of central banks, including the Bank of England, raising rates to tackle inflation. This has led to a significant increase in monthly mortgage repayments for millions of homeowners.
Despite the impressive financial results, HSBC’s CEO, Noel Quinn, issued a warning about tougher times ahead, particularly for homeowners. He expressed concern about the impact of high inflation on the bank’s customers and highlighted uncertainty in the UK’s economic outlook. Quinn mentioned that although they haven’t seen significant stress in the mortgage book in the UK, challenges may arise as more mortgage customers move off fixed-term deals in the next six months, with further rate increases expected.
To address these challenges and maintain profitability, HSBC is reevaluating its global footprint and considering exiting from a dozen countries to boost profits. Despite the global economic challenges, the bank remains optimistic about achieving its revised mid-teens return on tangible equity target in 2023 and 2024, citing strong profit generation worldwide, increased revenue in global businesses, and effective cost control.
Meanwhile, the Bank of England is anticipated to raise the base interest rate for the 14th consecutive time, potentially reaching 5.25 per cent. However, while mortgage interest rates have risen, savings rates, especially for easy-access accounts, have not increased as rapidly. In response, the Financial Conduct Authority unveiled a 14-point action plan to ensure banks and building societies pass on interest rate rises to savers, intending to name and shame banks that offer the worst savings rates twice a year as part of the crackdown.