HSBC is managing expenses by investing in technology and increasing efficiency.
London-based HSBC’s operating expenses increased by 1% year over year to $7.96 billion in the third quarter, driven by technological expenses and innovation banking costs.
“Costs were up 1% in the quarter as lower restructuring costs were offset by higher technology spend, a higher performance-related pay accrual and costs from HSBC innovation banking,” Chief Financial Officer Georges Elhedery said during the bank’s third-quarter earnings call today.
THE BIG PICTURE: HSBC aims to digitalize operations to drive growth and efficiency, according to the bank’s Q3 earnings presentation.
Across the industry, financial institutions are doing the same: using tech to reduce costs and increase the efficiency of their operations. Citibank, for example, is investing in tech personnel to leverage automation for efficiency, while PNC is reducing headcount and using that savings to improve its tech stack.
BY THE NUMBERS: In Q3, HSBC reported;
- Operating expenses of $8 billion, up 1% year over year;
- Net interest income of $9.2 billion, up 16% YoY;
- Revenue of $16.1 billion, up 40% YoY; and
- Customer deposits of $1.5 billion, flat YoY.
FLASHBACK: In June, the $3 trillion bank bought Silicon Valley Bank’s United Kingdom division for a mere £1 ($1.12), after the failure of SVB. HSBC also acquired Citi’s wealth business in China for $3.6 billion earlier this month.
“The planned acquisition of Citi’s wealth business in mainland China will also help accelerate our growth plans for this business,” Elhedery said.
The $3 trillion bank is exploring AI use cases for boosting developers’ productivity, and using Google Cloud’s generative AI model to crack down on money laundering.
FUTURE LOOK: HSBC is exploring a sale option for its operations in Canada.
“The planned sale of our Canada banking business also remains on track to complete in the first quarter of 2024,” Elhedery said. The sale will reduce the bank’s global net interest income in subsequent quarters once the deal is completed, he said.
MARKET REACTION: Shares of HSBC [NYSE: HSBC] were down 1.61% from market open to $36.12 as of 1:50 p.m. today. HSBC has a market capitalization of $138.81 billion.
