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 giving $2.7bn (£2bn) to shareholders after a 32% rise in profits, which will assure the Treasury that the UK’s top banks can shoulder a tax increase in tomorrow’s budget.
The London-headquartered bank reported this morning that profits grew almost 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 with last year.
It meant the bank could give $2.7bn to shareholders. That included another $1bn share buyback, as well as an interim dividend of $0.1 a share, which the bank said would mean distributing a further $1.71bn to its investors.
Net interest income – the difference between what banks charge for loans versus what they 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.
HSBC’s jump in profits is 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 the former chancellor Jeremy Hunt – which would raise upwards of £2bn a year.
Abhijay Sood, an economist at the New Economics Foundation, said Healey should go further.
He said: “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.”
Today’s key events
• Morning: UK holds auction of Treasury gilt 2032
• 1pm GMT: US house price index
• 2pm GMT: US consumer confidence report
• 2pm GMT: US new homes sales data
We’ll be tracking all the main events throughout the day on our business live blog …
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