Customers use automated teller machines (ATM) at a bank branch of HSBC Holdings Plc in Hong Kong, China, at night on Saturday, February 16, 2019.
Anthony Kwan | Bloomberg | Getty Images
HSBCFull-year 2023 pre-tax profit fell short of analysts’ estimates on Wednesday, as impairments related to the lender’s stake in a Chinese bank hit and London-listed shares fell as much as 7%.
Europe’s largest bank by assets saw its pre-tax profit rise by around 78% to a record $30.3 billion in 2023 from a year earlier, it said in a statement released during the midday trading break in Hong Kong on Wednesday . This missed the average estimate of $34.06 billion from analysts tracked by LSEG.
Chief Executive Noel Quinn also announced another share buyback worth up to $2 billion, to be completed before the bank’s next quarterly earnings report. HSBC also said it would consider offering a special dividend of 21 cents per share in the first half of 2024 after the sale of its Canada business is completed.
With the highest full-year dividend per share since 2008 and three share buybacks in 2023 totaling $7 billion, the bank returned $19 billion to shareholders last year, according to Quinn.
Quinn’s compensation doubled from $5.6 million the year before to $10.6 million in 2023, boosted in part by variable long-term incentives since his appointment in 2020.
HSBC suffered a $3 billion “valuation adjustment” for its 19 percent stake in China’s Bank of Communications, Quinn said. In an interview with CNBC following the earnings release, he said it was “a technical accounting adjustment” and “not a reflection” of BoComm.
That writedown was among items that caused the bank’s fourth-quarter pretax profit to plunge 80% to $1 billion from a year earlier.
HSBC’s Hong Kong shares gave up gains of about 1% and fell as much as 5% after trading resumed. The benchmark Hang Seng Index rose by about 2%. Shares in London fell about 7% in early deals, set for their biggest one-day decline since 2020, according to Reuters.
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Here are the other highlights of the bank’s full-year 2023 financial report:
- Revenue for 2023 rose 30% to $66.1 billion, compared to the average LSEG forecast of about $66 billion.
- Net interest margin, a measure of lending profitability, was 1.66% – compared to 1.48% in 2022.
- The common equity Tier 1 capital ratio – which measures the bank’s capital relative to its assets – was 14.8%, compared to 14.2% in 2022.
- Basic earnings per share were $1.15, compared to LSEG’s median forecast of $1.28 in 2023 and 75 cents in 2022.
- The dividend per common share was 61 cents – the highest since 2008 – compared to 32 cents in 2022.
Outlook 2024
HSBC, which has a second home in Hong Kong, said it was focusing on the fastest-growing parts of Asia, a continent where the bank makes most of its profits.
In an earnings call for investors and analysts, the bank said it had completed the sale of its operations in France, Oman, Greece and New Zealand and was in the process of exiting Russia, Canada, Mauritius and Armenia.
The bank highlighted two key macroeconomic trends: falling interest rates amid easing inflation – a development that could reduce its interest income; and a continued reconfiguration of global supply chains and trade.
“International expansion remains a core strategy for companies and institutions looking to develop and expand, particularly medium-sized businesses, which HSBC is very well positioned to serve. Instead of deglobalization, we are experiencing a re-globalization of the world as an offering. “Chains are changing and intra-regional trade flows are increasing,” Quinn said in the earnings release.
The bank is targeting a return on tangible equity in the mid-teens for 2024, which was around 14.5% last year.
HSBC said it would focus on expanding non-interest revenue streams through its wealth and transaction banking businesses. Noninterest banking income of at least $41 billion is expected for fiscal 2024.
HSBC said it remains cautious about the loan growth outlook for the first half of 2024 given economic uncertainty and expects mid-single-digit annual percentage growth in the medium to long term.
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2024-02-21 11:12:38
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