HSBC Rules Out London Exit as Quarterly Profit Hits $9.6bn

HSBC's third-quarter profit jumped 32% to $9.6bn (£7.2bn), and the bank's chief financial officer used the results day to kill off speculation that Britain's biggest lender might leave London over threatened tax rises.

Pam Kaur told journalists on Tuesday there was "no pressure", particularly from shareholders in HSBC's cornerstone Hong Kong market, to shift the bank's headquarters abroad. The statement lands days before Wednesday's budget, in which the chancellor, John Healey, is expected to tax Britain's banks, likely by reversing the previous Conservative government's cuts to the bank surcharge — a move The Guardian revealed earlier this month.

"Irrespective of what happens on taxes, we are there to support our customers, and that is what we will do," Kaur said during the media call. "We are very comfortable, we are domiciled in the UK and we remain in the UK. So that question is just not on the table."

What do the numbers say?

Alongside the profit surge, HSBC unveiled plans to hand $2.7bn to shareholders through dividends and buybacks. Net interest income rose to $9.3bn in the third quarter, up from $8.8bn a year earlier. The bank credited hedging strategies and deposit growth in Hong Kong — UK deposits stayed flat — rather than the interest-rate tailwind its critics point to.

Despite the strong quarter, HSBC's UK-listed shares plunged almost 6% on Tuesday morning, threatening its status as the biggest company on the FTSE 100. Kaur speculated that investors may have expected stronger forecasts for net interest income — the gap between what banks charge on loans and pay on deposits. The quarter's profit was also boosted by lower loan losses and smaller legal provisions compared with last year.

Why does the relocation question keep coming back?

Lobby groups have spent months warning that banks could shift business and jobs to rival hubs if tax bills climb. Jamie Dimon, JP Morgan's chief executive, said he could scrap plans for a new £3bn London headquarters if Britain became "hostile" to banks. A handful of wealthy businesspeople have already said they're leaving the UK, some criticising Labour's tax policies.

HSBC has form here. It makes the bulk of its profits in east Asia and has twice been pushed to shift or split its operations in reaction to UK policies:

• In 2015, growing regulatory burdens and a new bank levy led HSBC to weigh moving its headquarters from London to Hong Kong. The Conservative government later scaled the levy back to cover only UK-based assets, a boon to HSBC.
• In 2022, the bank faced pressure to separate its profitable Asian business from the rest of its operations, amid anger that the UK had forced HSBC to cancel its dividend during the first Covid lockdown.

Kaur gave broad backing to Healey and the prime minister, Andy Burnham, saying the bank was "very encouraged by the government's growth agenda" and would "just have to see how businesses and customers react".

Can the banks afford the tax?

Campaigners say the results answer that question themselves. Net interest income has been a flashpoint for groups pushing a UK bank tax, including the Trades Union Congress, which argues bank profits have been driven by higher interest rates rather than improving performance.

TUC general secretary Paul Nowak said HSBC's results showed banks could comfortably shoulder higher taxes. "Some in the finance lobby have tried every which way to stop tax rises in the budget. But these results make it blatantly obvious banks can afford to contribute more," he said.

Abhijay Sood, an economist at the New Economics Foundation thinktank, called HSBC's strong profits "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," Sood said. "While the rumours of a bank tax change in the budget are welcome, it is unlikely to go far enough … 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."

Wednesday's budget will now set the test: whether a higher bank surcharge dents HSBC's commitment to London, or simply trims a payout machine that just printed $9.6bn in a single quarter.

By Grace Kim