HONG KONG/LONDON - HSBC Holdings reported a record annual profit that nonetheless came in below analysts’ forecasts. The income boost from higher interests rates was offset by a hefty US$3 billion (S$4 billion) charge from its stake in a Chinese bank.
HSBC, which has a market value of US$160 billion, reported on Feb 21 a pre-tax profit of US$30.3 billion for 2023, up 78 per cent from US$17.5 billion in 2022.
The results were worse than the US$34.1 billion mean average estimate of brokers compiled by HSBC.
The British lender rewarded investors with a fresh US$2 billion share buyback and said it would consider a special dividend of 21 US cents per share in the first half of 2024 once its Canada disposal is complete.
However, the record-high annual profit was marred by a US$3 billion impairment on the bank’s stake in China’s Bank of Communications (BoCom).
China’s deepening real estate crisis has had a ripple effect on global banks with exposure to the world’s No. 2 economy, with HSBC taking the largest write-down so far among foreign peers.
The write-down in the lender’s BoCom stake came after a review of the Chinese bank’s likely future cash flows and outlook for loan growth and interest margins, HSBC said, amid China’s shakier-than-expected economic recovery.
Rival Standard Chartered in October took a nearly US$1 billion hit on its own China bank stake, as widening loan losses compressed lenders’ profits.
HSBC chairman Mark Tucker said in a release: “China’s recovery after reopening (following the pandemic) was bumpier than expected, but its economy grew in line with its annual target of around 5 per cent in 2023.”
The biggest European lender said it remains cautious for the loan growth outlook in the first half of 2024, against slowing economic growth in many economies where inflation persists.
HSBC said costs grew 6 per cent in 2023, more than it had forecast, due to the impact of higher-than-expected bank levies in the United States and Britain. It also said costs would grow a further 5 per cent in 2024, as it grapples with inflation while investing in its businesses.
The bank reported a 14.6 per cent return on tangible equity (Rote), a key performance target, in 2023, which fell behind an estimated 17 per cent. It said it continues to target Rote in the mid-teens for 2024.
Notably, HSBC chief executive Noel Quinn saw his total pay double in 2023 to US$10.6 million from US$5.6 million the year before, as long-term incentives from his appointment in 2020 began to vest, boosting his variable pay.
HSBC said its bonus pool rose to US$3.8 billion from US$3.4 billion the prior year, reflecting improved performance, and it would also launch a new variable pay scheme for junior and middle management staff.
The London-headquartered bank announced a fourth interim dividend of 31 US cents per share, resulting in a total for 2023 of 61 US cents per share. REUTERS
