Hong Kong/London (Reuters) – The major British bank HSBC made a record profit last year despite billions in write-offs in China.
Pre-tax profit jumped 78 percent to $30.3 billion, HSBC announced on Wednesday. However, this meant he missed analysts’ estimates, which averaged 34.1 billion. The reason for this was a three billion dollar impairment on HSBC’s stake in the Chinese Bank of Communications (BoCom). There, the weak economy and the real estate crisis are eating into the loan books, and many loans are shaky.
The write-down is the result of a review of expected cash inflows, expected lending volumes and interest margins in China, the bank said. But CEO Noel Quinn believes that valuations for office properties in mainland China have bottomed out, as he said on Wednesday. He expects a “progressive, gradual recovery”, but it will take a few years for the real estate market to overcome the current challenges. To date, no foreign institution has written down more on its investments in China than HSBC.
This pushed down HSBC shares in London by almost seven percent – even though the company announced another two billion dollar share buyback at the same time. With a quarterly dividend of 31 cents, the distribution for the full year rose to 61 cents per share.
The outlook for 2024 is bleaker than expected, wrote equity analyst Matt Britzman of Hargreaves Lansdown: “2023 was a strong year for HSBC, but the earnings trend appears to be coming to an end. Things will get more difficult from here on out.” Given the economic situation in many countries, Europe’s largest bank was skeptical about credit growth, at least for the first half of the year.
Costs rose by six percent last year, more than expected, because bank levies in the USA and Great Britain were higher. HSBC is preparing for five percent higher costs this year. Due to the China depreciation, the return on capital employed (ROTE) in 2023 was 14.6 percent, significantly lower than the 17 percent expected by analysts. In principle, the bank is still aiming for around 15 percent.
CEO Quinn can expect compensation of $10.6 (2022: $5.6) million for the past year, almost twice as much as the year before. This reflects the long-term bonuses from the time he took office, which are now gradually due. Overall, bonuses for HSBC bankers rose to $3.8 billion from $3.4 billion.
(Report by Selena Li and Lawrence White; Written by Alexander Hübner, edited by Myria Mildenberger. If you have any questions, please contact our editorial team at [email protected] (for politics and economics) or [email protected] (for companies and markets).)
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