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HSBC has announced its second $2bn share buyback of the year after rising interest rates helped the bank post bumper quarterly profits of $8.8bn.

The UK-based lender on Tuesday said it would pay a dividend of 10 cents a share on top of the 10 cents it paid for the first quarter, as it reported second-quarter pre-tax profits that were 89 per cent higher than the $4.6bn it recorded a year earlier and beat analyst expectations of $8bn.

Chief executive Noel Quinn said it was a “strong first half performance” with “good broad-based profit generation around the world, higher revenue in our global businesses driven by strong net interest income, and continued tight cost control”.

Net interest margin — a crucial measure of lending profitability — rose to 1.72 per cent in the second quarter, up from 1.69 per cent in the first three months of the year and beating expectations of 1.66 per cent.

The figures are the latest sign of how central banks’ swift interest rate rises are boosting the sector’s performance, with banks generating profits from the difference between the interest they receive from making loans and the rate they pay out to depositors.

Rival Standard Chartered last week reported better than expected results. HSBC is particularly sensitive to interest rates as one of the world’s largest deposit-taking institutions, with total assets of $3tn.

HSBC announced a $2bn share buyback when it reported its first-quarter earnings in May, as it sought to shore up investor support in the face of intensifying criticism from its biggest shareholder, Chinese insurer Ping An. The bank has completed that buyback and expects to start the next one “shortly” and complete it within three months, it said on Tuesday.

The quarterly earnings report was HSBC’s first since shareholders rejected a proposal, backed by Ping An, to split off its Asian operations. Though based in the UK, HSBC makes most of its profits in Hong Kong and mainland China.

Ping An has been pressing HSBC to split, arguing its model straddling east and west is not sustainable. The Chinese group has been less vocal on the issue since other shareholders rejected the proposal.

HSBC said it expected $900mn in credit losses, including charges related to commercial real estate in China and to its UK commercial banking operations. It has $14.3bn of exposure to Chinese commercial real estate.

“There remains a degree of uncertainty in the forward economic outlook, particularly in the UK, and we are monitoring risks related to our exposures in mainland China’s commercial real estate sector,” it said.

The bank’s customer lending fell by $9bn compared with the previous quarter, as rising rates hit demand for loans. 

In the UK, HSBC and other lenders are under pressure from Bank of England governor Andrew Bailey to pass on higher interest rates to savers, which could reduce banks’ net interest margin.

The net interest margin of HSBC’s UK ringfenced bank was 2.49 per cent, far higher than the 1.83 per cent of its Hong Kong entity.

HSBC’s Hong Kong revenues rose 64 per cent in the first half of this year compared with the same period a year earlier.

In June, HSBC agreed new terms for the long-delayed sale of its French retail banking network to a company owned by the US private equity group Cerberus.

The sale — part of HSBC’s strategy to focus on its profitable Asian operations while cutting costs and selling off operations in Europe and North America — had to be renegotiated after rising rates increased the amount that its US private equity buyer would have to inject.

HSBC has agreed to keep hold of billions of dollars’ worth of loans that were intended to be part of the deal.

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