There are clear skies ahead for Europe’s largest lender. HSBC (HSBC) released its third quarter earnings report yesterday showing a 76% year-over-year growth in quarterly profits and highlighting optimism around the future of the credit market — yes, that number is correct.
A contributor to the strong performance was the release of $700m that HSBC had set aside as provisions for bad loans during the Covid-19 pandemic. The funds were earmarked to cover the potential of defaults from its borrowers — you know, sometimes it's better to be safe than sorry. According to the bank, the release of the funds was a reflection of "continued stability in economic conditions and better-than-expected levels of credit performance."
HSBC also gave its investors a rosy revenue outlook, pointing to fee growth across its businesses as well as the potential for rising interest rates to grow its net interest income.
Why it matters
Banks and financial companies are historically the sectors that respond well to a rising interest rate environment. While the rest of the market has been in a slump over inflation concerns, shares of HSBC have risen by around 20% in the last month.
