HSBC profits surge 32%, sparking fresh calls for bank taxes in the budget – business live

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As he puts the finishing touches to tomorrow’s budget, John Healey may note that another bank has reported a jump in earnings.

HSBC is handing $2.7bn (£2bn) to shareholders after a 32% surge in profits, that will further assure the Treasury that the UK’s top banks can shoulder a tax hike in the budget, my colleague Kalyeena Makortoff reports.

The London headquartered bank reported this morning that profits grew nearly a third to $9.6bn in the July to September quarter - slightly below consensus estimates - helped by higher interest rates, lower loan losses and smaller legal provisions compared to last year.

It meant the bank could hand $2.7bn to shareholders. That included another $1bn share buyback, as well as an interim dividend of $0.1 per share, that the bank said would mean distributing another $1.71bn to its investors.

Net interest income - the difference between what banks charge for loans versus pay out for savers’ deposits, rose to $9.3bn from $8.8bn year on year. However, that was apparently lifted by its hedging strategy and a growth in deposits in Hong Kong, while UK deposits stayed flat.

HSBC is following Barclays, which last week reported a 12% jump in profits

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HSBC has also been asked about the impact of AI on the jobs market, after rival Barclays announced 5,000 job cuts last week.

The Financial Times reported earlier this month that HSBC is planning sweeping job cuts in its UK wealth management business, but the bank dodged the question today.

“We know that AI will change how work is done across industries, and of course it will impact some roles. It’ll transform other roles, and it will change them, while creating entirely new roles. So beyond that, there’s nothing specific in a number-term that I want to share or indeed have to share at the moment.

“For the wealth management business, the UK is a home market and we are a leading wealth manager. I’m not going to comment on press speculation on job losses, but what I can tell you is that in terms of customer engagement and serving the needs of our customers, we absolutely focus on the workforce we have, both in terms of skilling it and building on it. And we are also hiring in multiple areas in the UK.”

The TUC are also urging the Chancellor to increase taxes on banks in tomorrow’s Budget, arguing the sector could pay tens of billions of pounds more.

Rather than simply reversing Jeremy Hunt’s cut to the bank surcharge from 8% to 3%, the TUC argue that the surcharge – additional corporation tax – should be increased further.

That would provide funding to pay for a social energy tariff that brings down energy bills for those on low and middle incomes.

Hiking the surcharge to 16%, they say, would deliver £24bn over four years.

A 35% surcharge, which would be the same level as the windfall tax the Conservatives imposed on energy companies, would yield £60bn over four years.

“Some in the finance lobby have tried every which way to stop tax rises in the Budget. But these results make it blatantly obvious banks can afford to contribute more.

“It’s not just HSBC. Barclays announced bumper profits last week too. And Britain’s big four banks have made more than £200bn in profit over the last five years.

“With Trump and Putin’s illegal wars rumbling on, working people have another cold, hard winter ahead. Households and businesses are going to need more support - and it’s time for the Chancellor to make the banks pay a fairer share.”

HSBC’s jump in profits are prompting fresh calls for new bank taxes in the budget.

As the Guardian reported earlier this month, Healey has decided to tap the financial sector for additional revenue. One way would be to reverse cuts to the bank surcharge made by former chancellor Jeremy Hunt – which would raise upwards of £2bn a year.

Abhijay Sood, economist at the New Economics Foundation, argues that Healey should go further!

“It’s not surprising that HSBC have made such significant profits in the last quarter, but it will be difficult news to swallow for households struggling with rising mortgage costs. Like other big banks, its profitability has depended on keeping interest rates on savings accounts low, and a “stealth subsidy” from taxpayers via the Bank of England due to quantitative easing.

“While the rumours of a bank tax change in the Budget are welcome, it is unlikely to go far enough. While banks are making over a billion pounds a week of profit, NEF analysis suggests that the restoration of the bank surcharge to 8% would raise just £1.8bn a year from them.The chancellor should go further by clawing back the stealth subsidy, and use this to fund inflation-busting investment and keep the essentials of life affordable for ordinary people.”

HSBC CFO Pam Kaur is speaking to the media now.

On the issue of a bank tax (which John Healey could announce tomorrow), Kaur expresses support for what Andy Burnham’s government are doing, saying:

“We only have 24 hours to go. We are very encouraged by the government’s growth agenda, particularly how we can lean-in to support not just specific sectors like UK innovation, infrastructure. and the UK trade deals, but also in terms of how we are the connector for the UK with the rest of the world, given the success the government has had with many of these international trade deals.”

But Kaur also said HSBC would have to ‘respond to customer behaviour’:

“Now, obviously, as our customers make their business investment decisions, we will respond accordingly, because that’s what we do as banks. When the lending demand goes up, we lend more. We are ready with the right risk appetite to do so. We’ll just have to see how businesses and customers react.”

Announcing today’s financial results, Georges Elhedery, HSBC’s group CEO, said:

“Our performance shows that in a more complex world clients continue to turn to us to navigate uncertainty and seize new opportunities.

It also reflects consistent execution of our strategic priorities with pace, precision and discipline.

As we simplify HSBC, we are creating greater capacity to invest, grow and deliver strong returns for our shareholders.”