Gabby speaks to star economist Lord Jim O’Neill of Gatley about growing up in Manchester, trying to take over one of the city’s football clubs and how an acronym made him famous.

The former Northern Powerhouse minister also lifts the lid on life at Goldman Sachs and what he believes the next few years hold for the global economy – and where retail investors should be looking.

Plus, interactive investor’s Richard Hunter joins Gabby to suggest ways you can get started with your own investments.

This episode is also available as a vodcast on the ii website at https://www.ii.co.uk/stock-market-news/video-podcasts and our YouTube channel at https://youtu.be/ikswvhr_ZRQ.

The ii Family Money Show is brought to you by interactive investor (ii). For more information on interactive investor's Super 60 list of rated investments, visit https://www.ii.co.uk/ii-super-60. 

And for help getting started with your fund selections, head to https://www.ii.co.uk/quick-start-funds.

Follow Gabby:
Twitter @GabbyLogan
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Important information
This material is intended for educational purposes only and is not investment research or a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy. The value of your investments can rise as well as fall, and you could get back less than you invested. SIPPs are aimed at people happy to make their own investment decisions. You can normally only access the money from age 55 (57 from 2028). The investments referred to may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. Pension and tax rules depend on your circumstances and may change in future. Past performance is not a guide to future performance. Interactive Investor Services Limited is authorised and regulated by the Financial Conduct Authority.

Lord Jim O'Neill: The ii Family Money Show

Read the article here: https://www.ii.co.uk/analysis-commentary/market-snapshot-tech-firing-line-ftse-100-benefits-ii531449

Technology stocks were in the firing line at the end of a testing week, with some of the recent froth being blown off after what has been a stellar rise for those stocks which have an AI slant.
 
Recent comments coming out of the semiconductor sector have raised some concerns that the current expectations for limitless growth may have been overdone. After monumental share price rises over the last year or so, Super Micro Computer shares plunged by more than 23%, while the AI darling Nvidia fell by 10%. The losses drove the Nasdaq to fall by more than 2% to not only end the week sharply lower, but also to pair its gains in the year to date to just 1.8%. At the same time, the disproportionate impact of mega cap tech stocks on the benchmark S&P500 also moved the index lower, shaving its gains so far this year to 4.1%.
 
The Dow Jones escaped the selling pressure and rose moderately in the session, propped up by a strong earnings report from American Express, which lifted the shares over 6%. Even so, the recent weakness which has been precipitated by evaporating hopes for an immediate interest rate reduction and geopolitical concerns has left the Dow ahead by just 0.8% this year. While some of the immediate fears of an escalation in the Middle East were soothed following Iran’s statement that it had no plans for a retaliatory attack, which also resulted in a decline in the oil price, the general fragility of tensions in the region remains close to the surface and is clearly playing on investors’ minds.
 
The general backdrop has led to increasing focus on the corporate earnings seasons, where there is pressure for companies to match expectations given some of the stretched valuations which have resulted from earlier market gains. Among a raft of companies reporting this week are the majority of the Magnificent Seven, namely Tesla, Alphabet, Microsoft and Meta Platforms, with any earnings misses or cautious guidance statements likely to be punished. Elsewhere, the likes of General Motors, Ford, Boeing, AT&T and Exxon Mobil will keep investors busy in translating the level of earnings to the current state of the nation in investment terms.
 
Asian markets were mixed to positive overnight, with some earlier weakness in chip sector shares being largely offset by the apparent de-escalation of tensions in the Middle East. Nonetheless shares in China were broadly lower, as the authorities left their prime rates unchanged, which was enough to outweigh some previous optimism following the announcement that overseas investment in the tech sector would be promoted. The road to recovery for the Chinese economy is proving to be bumpy, with many investors having fled the country to concentrate on other regions such as Japan in recent months.
 
Given its lesser reliance on tech stocks, the FTSE100 powered ahead in early exchanges, in an echo of the market moves of 2022 when high growth shares were eschewed in favour of more stable, defensive and value stocks, all of which are to be found in abundance in the UK’s premier index.
 
Meanwhile, the week ahead is one which is littered with any number of corporate earnings, not least of which are first quarter numbers from Lloyds Banking, Barclays and NatWest. The recent pick up of corporate activity as reported by the likes of Morgan Stanley and Goldman Sachs bodes well for Barclays in its investment banking arm, while the general pressure that was heaped upon the US banks in terms of Net Interest Income could also feature on this side of the pond. However, the strength of the UK banking sector could also result in further focus on shareholder returns, with the possibility of higher dividend payments and share buybacks likely to underpin sentiment if announced.

Listen here: tech in the firing line, but FTSE 100 benefits

The Magnificent Seven tech stocks, including Nvidia, Microsoft and Amazon, have dominated the investment landscape since the start of 2023. Collectively, they account for nearly 30% of the S&P 500 index. Joining Kyle to discuss the career risk for fund managers who don’t own the Magnificent Seven is Nick Clay, who oversees the Redwheel Global Equity Income fund. In a frank interview, Clay explains how bonuses and risk systems can fuel a herd mentality when a narrow cohort of the stock market is shooting the lights out. 

On The Money is an interactive investor (ii) podcast. For more investment news and ideas, visit www.ii.co.uk/stock-market-news.

Kyle Caldwell is Collectives Editor at interactive investor.

Important information:
This material is intended for educational purposes only and is not investment research or a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy. The value of your investments can rise as well as fall, and you could get back less than you invested. Past performance is not a guide to future performance. The investments referred to may not be suitable for all investors, and if in doubt, you should seek advice from a qualified investment adviser. SIPPs are aimed at people happy to make their own investment decisions. Investment value can go up or down and you could get back less than you invest. You can normally only access the money from age 55 (57 from 2028). We recommend seeking advice from a suitably qualified financial adviser before making any decisions. Pension and tax rules depend on your circumstances and may change in future. If you are in any doubt about the suitability of a Stocks & Shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of these products, you should contact HMRC or seek independent tax advice. Interactive Investor Services Limited is authorised and regulated by the Financial Conduct Authority.

The career risk of not owning the ‘Magnificent Seven’

Read the article here: https://www.ii.co.uk/analysis-commentary/ab-foods-shares-rocket-profit-promise-ii531463

With the ravages of the pandemic now firmly in the rear-view mirror, Primark has fully regained its status as the jewel in the AB Foods crown, with the group confident that there is much more to go for.
 
An unusual feature of the group is its diverse range of businesses, which allows not only for business and geographical diversification, but also for various units to pick up some of the slack elsewhere depending on the economic cycle. This was of particular benefit during the pandemic when Primark was all but shuttered, and now that the retail arm is back on track, the other units are making separate and additional progress.
 
Grocery, which accounts for 22% of overall sales, saw revenue and adjusted operating profit growth of 5% and 39% respectively over the period, driven by higher volumes and the effects of previous price increases which are now washing through. As expected, the Sugar unit also reaped the benefit of higher volumes in its Azucarera and Vivergo products, and helped along by higher sugar prices in Europe. The unit is responsible for 12% of overall sales, such that the revenue increase of 9% and the adjusted operating spike of 74% made a meaningful contribution to the overall picture.
 
However, the bulk of the business in terms of contribution and prospects is clearly the Primark arm, which continues to attract cost-conscious consumers in central locations, with incremental improvements to its online presence offering further choices. Primark now accounts for 46% of group sales, and saw revenue growth of 7.5% to £4.5 billion, comfortably in line with estimates. Meanwhile, like-for-like sales were ahead by 2.1%, while adjusted operating profit saw a significant increase of 46% to £508 million.
 
The Click & Collect trial has now been completed, and the group has been encouraged by the results which have pointed towards good basket sizes and strong additional sales in attached stores. It also provides extended choice beyond local stores for both new and existing customers, all of which have encouraged the group to announce a full roll-out to stores across England, Wales and Scotland with a curated range which includes the highly popular womenswear and children’s lines.
 
Store openings are also continuing apace, with nine stores opened in the period including three in the potentially huge growth area of the US. New stores generally contributed 5.4% of sales growth, given higher sales densities and increased selling space and in the US sales growth of 38.4% contributed to a sharp increase in adjusted operating profit. At the same time, and of particular importance to a value and volume driven business such as Primark, margins improved to 11.3% from 8.3% in the corresponding period, which is a significant achievement in a short timeframe.
 
Indeed, free cash flow also turned to a positive £468 million from a negative £510 million due to a number of factors including higher operating profit, a normalisation of inventory at Primark, reducing inflation pressures and stock reductions in other units.Net debt also reduced from £2.6 billion to £2.5 billion over the period, while at the group level adjusted operating profit grew by a notable 46% to £951 million, underpinned by a 5% increase in revenues to £9.73 billion, which was a rare miss among the results against expectations of £9.9 billion.
 
For the year as a whole, the group expects growth to be significantly above expectations both in terms of cash generation and profitability. Such optimism on immediate prospects enabled another increase to the dividend, where the projected yield of 2.7% including specials remains somewhat pedestrian in comparative terms but nonetheless shows a declared direction of travel. In the background, the latest share buyback programme of £500 million is ongoing, which should provide some support to the share price.

Listen here: AB Foods shares rocket on profit promise

Read the article here: https://www.ii.co.uk/analysis-commentary/lloyds-bank-q1-results-fail-inspire-ii531477

Lloyds has kicked off the quarterly reporting season for the banks in generally uninspiring style, although there are some signs that performance could tick higher as the year progresses.
 
Compared to the corresponding period, pre-tax profit of £1.63 billion is 28% lower and also marginally light of the expected £1.66 billion, with pressure coming from both higher operating expenses and lower Net Interest Income. NII for the quarter of £3.2 billion was down by 10% and again shy of the estimated £3.26 billion, while most of the other key metrics tended to miss expectations.
 
Return on Tangible Equity (ROTE) of 13.3% compared with 19.1% the previous year, but was expected to hit 14.3%, while operating costs rose by 11% (or 6% excluding the revised Bank of England levy) to £2.4 billion. The combined pressures resulted in the cost/income ratio rising to 57.2% compared to a corresponding number of 47.1%, although more positively the number will likely remain sector-beating, as has been the case for some considerable time, and is also an improvement from the previous quarter where the number reached 71.5%.
 
However, there are certainly some signs that the backdrop could be improving. Interest rate reductions are still expected this year, which could shift some customer lending activity towards higher margin mortgage products, where there has been some pressure given pricing and demand limitations as consumers refinance. Lloyds had expected some of the subsequent pressure on the Net Interest Margin (NIM) to ease and the while the latest NIM figure of 2.95% compares with a slightly higher 2.98% in the previous quarter, it is above the expected 2.93% and as a crucial metric, could show that any pace of decline is starting to stabilise.
 
Elsewhere, the bank remains fundamentally in rude health, with a capital cushion (CET1 ratio) of 13.9% ticking up from last quarter’s 13.7% and comfortably ahead of the bank’s own target of 13%. Indeed, the group has stated that this figure may be managed down slightly over the next couple of years, which in theory could add to another of Lloyds’ main attractions, namely shareholder returns. At the moment, the previously announced share buyback programme of £2 billion is in progress, while a dividend yield of 5.4% adds to the investment attraction with the group currently providing strong capital and income returns.
 
Meanwhile, the move towards a more digital business will reap large rewards as the process evolves, with the closure of office space and indeed branches a reflection of the times as customer behaviour changes. This improves the longer-term outlook, although in the more immediate future there are other challenges to grapple with, not least of which is the perception that Lloyds is something of a barometer for the UK economy. As such, the group continues to grow other lines of revenue such as its Wealth offering to help offset the lesser income which a lower interest rate environment could bring.
 
The group has also reaffirmed its guidance for the rest of the year, such as a ROTE of around 13% and NIM in excess of 2.9%, while its managed approach to risk has seen a further nominal impairment charge of £57 million. Customer defaults remain well-managed and showing few signs of escalation, although in the background the previous £450 million set aside for potential motor finance mis-selling will remain a concern until the full results (and monetary value) of the investigation become clear later in the year.
 
In the meantime, an improvement of 24% in the share price over the last six months has removed any recent weakness, such that the shares have risen by 5% over the last year, as compared to a gain of 1.7% for the wider FTSE 100.

Listen here: Lloyds Bank Q1 results fail to inspire

Listen here: https://www.ii.co.uk/analysis-commentary/barclays-shares-hit-two-year-high-after-q1-results-beat-ii531504

Barclays has shown stable rather than dynamic growth over the quarter, beating expectations on most measures but with some question marks over its US operations.
 
Overall income declined by 4% to £7 billion, which was marginally ahead of the estimated £6.9 billion, with pre-tax profit of £2.3 billion comparing with £2.6 billion the year previous, but again ahead of expectations of £2.2 billion. Revenues were impacted by any number of factors, including mortgage margin pressure and adverse deposit dynamics at Barclays UK, lower inflation-linked income and a mixed performance from its investment bank.
 
Indeed, the performance of Barclays Investment Bank could lead to some investor disappointment. Recent strong numbers from the likes of Goldman Sachs and Morgan Stanley in the US were expected to read across to Barclays, whereas the unit reported an income decline of 7%. Fee and trading income for equities and debt were positive, but more than offset by weakness in fixed income and lower advisory fees. This is significant to the group’s overall performance, since the investment bank accounts for around half of total group revenue. The lower client activity and investment fees, the latter of which reflects a reduced fee banking pool as previously experienced by some of the bank’s US counterparts, dragged on numbers although the unit managed a Return on Tangible Equity (ROTE) of 12%, reflecting the benefit of diversified income streams.
 
Barclays US Consumer Bank saw income increase by 4% to £859 million, largely driven by higher credit card balances, although this came with something of a caveat, This rise in effectively unsecured lending has inevitably led to a small and containable increase in credit defaults, of which the bank is acutely aware. It has therefore taken the decision to increase the overall level of the impairment charge to £410 million (accounting for the majority of the group total of £500 million), reflecting this possibly higher level of delinquencies in US cards.
 
For the group as a whole, the balance sheet remains in strong shape and the key metrics for the most part were progressive. The ROTE figure of 12.3% may have dipped from 15% in the corresponding period, but it was ahead of the expected 11.7% and indeed comfortably in excess of the group’s 10% target. A cost/income ratio of 60% saw the benefit of some £200 million of cost efficiency savings, set against Barclays’ target of £1 billion for the year. The capital cushion, or CET1 ratio was also stable at 13.5%.
 
In terms of corporate activity, the group is looking to consolidate some of its more profitable markets. The Italian mortgage book is being sold at a loss of some £225 million, while the acquisition of Tesco Bank is expected to complete by the end of the year, adding a further string to Barclays’ UK income bow. In terms of these numbers overall, Barclays UK was possibly the strongest performing unit in terms of improved contribution and the bank clearly has designs to capitalise on this strength.
 
In terms of outlook, Barclays has maintained its guidance for the year, including ROTE in excess of 10%, Net Interest Income of £10.7 billion and a cost/income ratio of 63%. Further out, the group is anticipating larger shareholder returns which are likely to be skewed towards share buybacks, thus providing some share price support. In the meantime a dividend yield of 4.2% provides another level of return for investors in addition to the capital returns more recently experienced.
 
Indeed, the shares have risen by 24% over the last year, compared to a gain of 1.9% for the wider FTSE100, including a strong rally of 42% over the last six months.

Listen here: Barclays shares hit two-year high after Q1 results beat

Listen to the article here: https://www.ii.co.uk/analysis-commentary/natwest-results-show-why-its-citys-favourite-bank-ii531519

NatWest has been able to flex its financial muscles once more, outpacing expectations and maintaining its guidance for the year.
 
After a particularly strong start to the corresponding period last year, it is unsurprising that the headline numbers are lighter this time around. Even so, both of the key measures are ahead of forecasts. Total income of £3.47 billion was down by 10% but ahead of the expected £3.43 billion, while a pre-tax profit decline of 27% to £1.33 billion beat estimates of £1.26 billion.
 
Income has been affected on a number of fronts, such as lending margin pressure and lower deposit balances as customers search for higher rates of return after years in the doldrums. Nonetheless, the situation appears to be stabilising and the group has pointed to the fact that both net lending and customer deposits rose in the quarter. Of course, it remains to be seen whether this trend becomes established.
 
The increase in loans also gives a nod to potential customer defaults, with a further provision of £93 million, although the number remains significantly lower than some of its peers. It may also reflect the generally lower risk loan book which the bank runs and NatWest has itself stated that levels of default are low and stable. previously describing its own “intelligent approach to risk” as including a proactive attitude for those customers who may be approaching some level of financial strain, such that the new provision is a prudent move in the circumstances.
 
In relative terms, there were also other pockets of positive surprises. Net Interest Income of £2.65 billion, while 8.6% lower, was ahead of the guided £2.56 billion and the Net Interest Margin of 2.05% was ahead of both consensus as well as the previous quarter’s 1.99% number. A Return on Tangible Equity of 14.2% fell from 19.8%, but nonetheless was ahead of the ROTE figures which have been reported by competitors so far this season.
 
Given the backdrop, the balance sheet remains in rude health. A capital cushion, or CET1 ratio of 13.5% is comfortably ahead of the bank’s own target, while a cost/income ratio of 58.4% suggest an ongoing focus on efficiency. Indeed, the increasing migration of customers to digital platforms and the subsequent reduction in branch footprint are clearly playing into reducing costs, with the bank previously reporting that 9.8 million customers were now using its mobile app and that 94% of its customers’ needs are now being met digitally, as compared to 53% in 2019. In addition, while there was no updates on potential share buybacks at this stage as expected, a dividend yield of 5.9% is relatively punch compared to the rest of the sector.
 
The Commercial & Institutional unit, which accounted for 58% of the operating profit played a strong hand in the quarter, with growth coming from “multiple sectors” including an increase in lending and strong capital markets, and a ROTE of 14.6%. This led to operating profit of £769 million for the quarter, compared to £725 million in the final quarter of last year, while a mild reduction to customer deposits did little to blight the overall performance.
 
There had perhaps been an expectation that there would be an update on the potential retail offer for the government’s remaining stake in NatWest, which now stands at around 30%. Instead, the group stated that it was pleased with the recent momentum in reduction of the stake, edging towards the “shared ambition” of returning NatWest to private ownership.

Listen here: NatWest results show why it's the City's favourite bank

Listen to the article here: https://www.ii.co.uk/analysis-commentary/market-snapshot-uk-stocks-demand-ftse-100-new-high-ii531534

US markets regained their firm footing as the technology sector grabbed the headlines with some stellar earnings.
 
Inflation and a potential cut in interest rates has been a central debate over the last year and, as it becomes increasingly apparent that no such cuts are imminent, the pressure is transferred to company earnings, where results need to exceed expectations in order to maintain the market’s generally lofty valuations.
 
In particular, the mega-cap technology stocks which have been major drivers of market strength remain under the spotlight and in their latest updates, Alphabet and Microsoft duly delivered.
 
Alphabet shares rose by over 10% on better-than-expected earnings, while also declaring a significant $70 billion share buyback and its first ever dividend. Microsoft shares also rose after posting strong numbers which included an acceleration in sales of its cloud services.
 
With the quarterly reporting season now in full flow, this week will bring further updates in the technology space from the likes of Apple, Amazon and Advanced Micro Devices, while PayPal, Mastercard and McDonald’s will also provide some further colour on current consumer trends.
 
Friday’s Personal Consumption Expenditures index, the Federal Reserve’s preferred measure of inflation, had been awaited with some trepidation but in the event the reading was largely in line. Core PCE remained unchanged on a monthly and annual basis at 0.3% and 2.8% respectively, suggesting no worsening of the inflation picture.
 
By the same token, it puts no pressure on the Fed to revise its outlook, with this week’s interest rate decision universally expected to reveal a further no-change outcome. Indeed, interest on Wednesday will not be in the decision itself, but rather in any accompanying comments from the Fed on its current thinking.
 
The end of the week will also herald the latest non-farm payrolls figure, where the consensus is that a further 243,000 jobs will have been added in April, compared to a bumper 303,000 the previous month, and for the unemployment rate to remain unchanged at 3.8%. In the meantime, the main indices have resumed their upward path after a strong week and, in the year to date, the S&P500 is now up by 6.9%, the Nasdaq by 6.1% and the Dow Jones by 1.5%.
 
In Asian markets, Japan was the central area of focus despite the equity market being closed for a holiday. The yen was being closely followed having reached a multi-decade low against the US dollar, prompting speculation after a later relief rally that there may have been some intervention from the Bank of Japan. Despite being positive for the country’s exporters, the weakness of the yen also reduces purchasing power, with Japan being a major importer of energy.
 
Elsewhere, markets in China saw a surge in both mainland properties and real estate sectors on fresh speculation that there could be some imminent stimulus coming from the authorities in an attempt to revitalise home sales.
 
Meanwhile, there are increasing questions as to whether the FTSE100 has finally found favour on the global stage. The premier index continues to scale new highs, where it will not have escaped the attention of international investors that the UK remains relatively cheap in terms of valuation compared to most developed markets.
 
Rising commodity prices and especially gold have boosted large sectors to be found within the premier index, while the relative weakness of sterling has been an additional boost. Around 70% of FTSE100 earnings come from overseas, making them more profitable when translated back to sterling.
 
The index has now added 5.7% so far this year, with its constituents additionally providing an average dividend yield of 3.6% with the still undemanding valuation level suggesting that further growth is indeed achievable.

Listen here: UK stocks in demand as FTSE 100 at new high

This episode focuses on answering investment questions submitted by you. To tackle various topics, which range from explaining fund rules to whether share buybacks benefit private investors, Kyle is joined by Richard Hunter, head of markets at interactive investor. We love to hear from you, so if you have an investment-related question you would like us to address in a future episode, please do let us know by emailing OTM@ii.co.uk

On The Money is an interactive investor (ii) podcast. For more investment news and ideas, visit www.ii.co.uk/stock-market-news.

Kyle Caldwell is Collectives Editor at interactive investor.

Important information:
This material is intended for educational purposes only and is not investment research or a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy. The value of your investments can rise as well as fall, and you could get back less than you invested. Past performance is not a guide to future performance. The investments referred to may not be suitable for all investors, and if in doubt, you should seek advice from a qualified investment adviser. SIPPs are aimed at people happy to make their own investment decisions. Investment value can go up or down and you could get back less than you invest. You can normally only access the money from age 55 (57 from 2028). We recommend seeking advice from a suitably qualified financial adviser before making any decisions. Pension and tax rules depend on your circumstances and may change in future. If you are in any doubt about the suitability of a Stocks & Shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of these products, you should contact HMRC or seek independent tax advice. Interactive Investor Services Limited is authorised and regulated by the Financial Conduct Authority.

Eight of your investment questions answered

Read the article here: https://www.ii.co.uk/analysis-commentary/hsbc-returns-form-q1-ceo-quits-ii531545

The global banking behemoth has returned to form in the opening quarter of the new financial year, buoyed by an ongoing strategic reshuffle while continuing to reap the benefit of its vast and sprawling presence.
 
The retirement of the CEO was unexpected, but the share price impact muted. While the existing CEO will remain in place until a successor is found, there will inevitably be questions over the bank’s strategy. Streamlining over the last few years, including exiting from less profitable regions, has been a central plank. However, there have also been increasing calls for the Asian business to be spun off, which HSBC has firmly resisted, and it is possible that this debate may resurface once the new CEO is named.
 
Meanwhile, among the bank’s immediate strategic objectives are to grow its international businesses while also diversifying its revenues, especially in the likes of its wealth businesses in Asia. Apart from the longer-term potential for the key Chinese market, the group has also identified areas such as India and Vietnam as being some of the fastest growing economies at present, while the building economic connections between Asia and the Middle East, notwithstanding any geopolitical conflicts, are also emerging opportunities for HSBC with its sprawling footprint.
 
The group will therefore be pleased to note that its increase in revenues for the quarter has been driven in part by higher customer activity in its Wealth businesses, which account for some 35% of overall revenues as well as being a key growth aspiration area for the future. Wealth balances overall grew by 10% to $1.8 trillion, putting into perspective a drain of $41 billion in customer balances, mainly in the Hong Kong region.
 
Overall, the bank has beaten estimates after what was a messy fourth quarter last year. Pre-tax profit slipped slightly to $12.7 billion, while net profit of $10.2 billion exceeded the expected $9.7 billion. Revenues grew by 3% to $20.8 billion, where increased trading income in the Global Banking and Markets unit added to the stronger performance within Wealth. Net Interest Income suffered slightly on the basis of a nominal customer exit with deposit migration, although the reported figure of $8.7 billion was above estimates of $8.55 billion. In addition, there was an outsize contribution from non-interest income, which rose by 14%, or $900 million in the quarter. Return on Tangible Equity (ROTE) came in at 16.4%, outstripping its peers which have reported over the last week, and although the number was lower than the 18.4% reported in the corresponding period, it was markedly higher than the 12.8% reported in the fourth quarter.
 
The sale of the Canadian business was completed with a gain of $4.8 billion, resulting in a special dividend payment as expected of $0.21 per share. This adds to the current dividend yield of 7.3% which is the highest in the sector by some margin and of obvious interest to income-seeking investors. In addition, the bank announced a new share buyback programme of up to $3 billion, with shareholder returns remaining sharply in future strategic focus. Meanwhile, an impairment of $1.1 billion has been made as part of the planned sale of the Argentinian unit.
 
As ever, the size and strength of the balance sheet gives the bank both protection and insulation from external economic pressures. The CET1 ratio, or capital cushion of 15.2% is comfortably above requirements, with a range of between 14% and 14.5% expected for the remainder of the year. Operating expenses, which rose by 7% this quarter, are expected to moderate to growth of 5% as the group continues to invest in technology, while also fending off the impacts of inflation. Guidance overall is unchanged, including Net Interest Income of at least $41 billion and ROTE in the mid-teens.

Listen here: HSBC returns to form in Q1 but CEO quits

The interactive investor (ii) experts bring you the latest news, views and interviews from the heart of the City of London, including market updates, fund ideas and investing insight for all savers and investors.

Visit www.ii.co.uk for more investment insight and ideas.

Lord Jim O'Neill: The ii Family Money Show

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