HSBC’s $3 billion China writedown mars record annual profit

By Selena Li and Lawrence White

HONG KONG/LONDON (Reuters) -HSBC Holdings reported a file annual revenue, that nonetheless got here in beneath analysts’ forecasts because the revenue enhance from greater rates of interest was offset by a hefty $3 billion cost from its stake in a Chinese language financial institution.

HSBC, which has a market worth of $160 billion, reported on Wednesday a pretax revenue of $30.3 billion for 2023, up 78% from a yr earlier however worse than a $34.1 billion dealer estimate.

The British lender rewarded traders with a contemporary $2 billion share buyback, and mentioned it will take into account a particular dividend of $0.21 per share within the first half of 2024 as soon as its Canada disposal is full.

Nevertheless, the record-high annual revenue was marred by a $3 billion impairment on the financial institution’s stake in China’s Financial institution of Communications.

The financial institution’s Hong Kong-listed shares fell 3.4% in afternoon commerce.

China’s deepening actual property disaster has had a ripple impact on international banks with publicity to the world’s No.2 economic system, with HSBC taking the most important writedown to date amongst international friends.

The writedown within the lender’s BoCom stake got here after a assessment of the Chinese language financial institution’s doubtless future money flows and outlook for mortgage development and curiosity margins, HSBC mentioned, amid China’s shakier-than-expected financial restoration.

Rival Commonplace Chartered in October took a virtually $1 billion hit by itself China financial institution stake, as widening mortgage losses compress lenders’ income.

“China’s restoration after reopening (following the pandemic) was bumpier than anticipated, however its economic system grew according to its annual goal of round 5% in 2023,” Chairman Mark Tucker mentioned in a launch.

CAUTIOUS OULOOK, COSTS RISE

The most important European lender mentioned it stays cautious for the mortgage development outlook within the first half of 2024, towards slowing financial development in lots of economies the place inflation continued.

HSBC mentioned prices grew 6% in 2023, greater than it had forecast, as a result of affect of higher-than-expected financial institution levies within the U.S. and Britain. It additionally mentioned prices would develop an extra 5% in 2024, because it grapples with inflation whereas investing in its companies.

The financial institution reported a 14.6% return on tangible fairness (ROTE), a key efficiency goal, in 2023 which fell behind an estimated 17%. It mentioned it continues to focus on ROTE within the mid-teens for 2024.

Notably, Chief Government Noel Quinn noticed his complete pay double in 2023 to $10.6 million from $5.6 million the yr earlier than, as long-term incentives from his appointment in 2020 started to vest, boosting his variable pay.

HSBC mentioned its bonus pool rose to $3.8 billion from $3.4 billion within the prior yr, reflecting improved efficiency, and it will additionally launch a brand new variable pay scheme for junior and center administration employees.

The London-headquartered financial institution introduced a fourth interim dividend of $0.31 per share, leading to a complete for 2023 of $0.61 per share.

(Reporting by Selena Li in Hong Kong and Lawrence White in London; Enhancing by Himani Sarkar)

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