HSBC, Europe's largest bank by assets, has posted impressive financial results for the first half of 2023. The bank's net profit more than doubled to $18.1 billion compared to the same period last year. Bolstered by robust revenue growth, HSBC's profit before tax surged 147% year-on-year to $21.7 billion. Encouraged by these strong results, the bank's board has given the green light for a second interim dividend of $0.10 per share and announced a share buyback of up to $2 billion.

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HSBC's Remarkable Financial Results

HSBC's first-half performance in 2023 showcases a remarkable surge in net profit and profit before tax. The bank reported a net profit of $18.1 billion, doubling the previous year's figure of $9 billion. The profit before tax also soared to $21.7 billion, a significant increase from $8.78 billion in the first half of 2022. This growth was further supported by a $2.1 billion reversal of an impairment linked to the planned sale of its retail banking operations in France and a provisional gain of $1.5 billion on the acquisition of Silicon Valley Bank UK.

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Dividends and Share Buyback

HSBC's strong financial performance has allowed the bank to declare a second interim dividend of $0.10 per share. Additionally, the bank has announced a share buyback program of up to $2 billion, set to commence shortly and be completed within three months. This move reflects the company's confidence in its financial position and commitment to returning value to its shareholders.

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A Potential Return to Pre-Pandemic Dividend Levels

HSBC's CEO, Noel Quinn, expressed optimism about the bank's future dividends. He stated that if everything goes according to plan this year, HSBC should surpass its pre-pandemic dividend level. This prospect is exciting news for shareholders who remember that HSBC paid out a total dividend of $0.51 in 2018 and $0.30 in 2019. For 2022, the bank declared two interim dividends of $0.10 each, totaling $0.20. Quinn further revealed that the final interim dividend at the end of the year would aim to achieve a 50% payout ratio.

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Revenue Growth and Interest Rate Rise

HSBC's revenue witnessed a substantial increase of 50% year-on-year, reaching $36.9 billion in the first half of 2023. This revenue surge was driven by higher net interest income across all of the bank's global businesses, attributed to interest rate rises. Net interest income for the first half amounted to $18.3 billion, marking a 36% increase from the previous year, while net interest margin rose by 46 basis points to 1.70%.

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Solid Second Quarter Performance

In the second quarter of 2023, HSBC continued its impressive performance. The bank outperformed analysts' expectations, reporting an 89% jump in pre-tax profit, reaching $8.77 billion. Net profit for the quarter amounted to $6.64 billion, a 27% increase compared to the same period last year. Total revenue for the second quarter also demonstrated remarkable growth, reaching $16.71 billion, a 38% rise from the previous year.

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HSBC's Future Growth Strategy

Moving forward, HSBC aims to diversify its revenue streams to sustain growth beyond the existing interest rate regime. CEO Noel Quinn envisions future growth coming from corporate banking, international wealth, and international retail banking for the affluent. The bank has raised its key performance target, forecasting a near-term return on tangible equity of 12%, compared to the previous target of 9.9%. Furthermore, HSBC anticipates achieving a "mid-teens" return on tangible equity in the next two years, highlighting its focus on delivering sustained profitability and returns.

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HSBC's strong financial performance in the first half of 2023 has set a positive trajectory for the bank. The decision to announce a share buyback and the potential return to pre-pandemic dividend levels demonstrates the bank's commitment to shareholder value. With a solid second quarter and a strategic plan for future growth, HSBC remains poised for continued success in the global banking landscape.

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