After benefiting from rising interest rates in the UK and other countries, HSBC reported that its profits for the first half of the year have more than doubled.
To reduce the increasing inflation, central banks have started raising interest rates. Regulators in the UK, meanwhile, are worried that banks are not passing on enough of the increases to savers.
According to HSBC, pre-tax profit increased from $8.7 billion to $21.7 billion between January and June. “Our financial performance has continued to improve, aided by the interest rate environment,” said Noel Quinn, the company’s chief executive.
A significant portion of HSBC’s revenue increase can be attributed to a larger disparity between the income it received from products like loans, mortgages, and securities and the interest it paid on customer deposits, debt it issued, and other offerings.
More than 80% of its income came from activities outside the UK.
Mortgage interest rates have increased quickly, while savings rates, particularly for easy access accounts, have not increased as quickly.
According to the Financial Conduct Authority (FCA), banks will now risk “robust action” if they continue to give their consumers unjustifiably low savings rate. Sheldon Mills, the FCA’s executive director of consumers and competition, revealed on Tuesday that the agency has an action plan to encourage businesses to pass on interest rate.
He stated that the FCA might punish the bank or take action against the accountable parties if they continually failed to do so. Mills continued by saying that the FCA could impose fines of any amount, but he did not specify what a typical fine might be.
In only 2023, the Bank of England increased interest rates four times.
For some consumers whose lower packages have ended as a result, this has resulted in higher mortgage payments.
By the end of 2026, the mortgage payments for one million people will have increased by more than £500 per month, according to the Bank.
“With more mortgage customers due to roll off fixed-term deals in the next six months, and further rate rises expected, tougher times are ahead,” Quinn issued a warning. “In the UK, we have seen limited signs of stress in the mortgage book, although we are acutely aware of the day-to-day financial challenges that some of our customers face,” he added.
The HSBC issued a warning about the hazy economic future despite the spike in profit.
Coming Thursday’s anticipated rate increase by the Bank of England would be the 14th consecutive increase in borrowing prices since December 2021.
When the average interest rate on a two-year fixed agreement approached 7% last month, the cost of a mortgage reached a 15-year high. In May, HSBC predicted that the $1 purchase of SVB UK earlier this year, facilitated by the government and the Bank of England, would improve its profits by $1.5 billion.
