‘a much healthier capital base’

HSBC Holdings plc (NYSE: HSBC), on Tuesday, said its profit more than doubled in its fourth financial quarter. Shares are up more than 5.0% this morning.

Notable figures in HSBC Q4 earnings report

• Net profit printed at $4.62 billion versus $3.81 billion expected
• Revenue jumped 24% to $14.87 billion versus $14.49 billion expected
• Net interest income increased 23% year-over-year to $32.61 billion
• Net interest margin stood at 1.48% – up 28 basis points versus last year

Last November, the financial services behemoth signed a $10.1 billion deal with the Royal Bank of Canada to exit the Great White North. Once that transaction is complete, it may also launch a share repurchase programme, as per CEO Noel Quinn.

We see good growth prospects for our franchise. That allows us to be confident about our 12%+ ROTE in 2023 and beyond. That should generate good capital and allow us to consider buybacks and dividends at a higher level.

Versus the start of the year, HSBC stock is up 25% at writing.

HSBC also announced a special dividend

The bank also promised a special dividend of 21 cents a share upon closing the HSBC Canada deal. On CNBC’s “Capital Connection”, the chief executive added:

There are some economic challenges in the near term. [But], I think what we’re looking at now is a much healthier capital base and a much healthier profit generation than we saw pre-covid.

On Tuesday, HSBC Holdings plc reiterated its outlook for at least $36 billion of net interest income this year, as per the earnings press release.

Wall Street currently has a consensus “buy” rating on HSBC stock. The average price target of a little under $45 suggests another 15% upside from here.