HSBC’s $3 billion write-down in China eclipses record annual profit.

Yasir AliFebruary 21, 2024

0 24 3 minutes read

HSBC's $3 billion write-down in China eclipses record annual profit.

HONG KONG/LONDON – HSBC Holdings (HSBA.L), provides new tab, posted an all-time high annual profit in China eclipses, but it fell short of analysts’ expectations because of a significant $3 billion control from its investment in a Chinese bank, which offset the income encourage from higher mortgage rates.

With a market worth $160 billion, HSBC revealed on Wednesday that its pretax profit for 2023 was $30.3 billion, up 78% from the previous year but below the $34.1 billion intermediary estimate.

Following the completion of its disposal of its Canadian holdings, the British lender compensated investors with a new $2 billion possess buyback and announced that it would evaluate a dividend that was unique of $0.21 each share in the initial half of 2024.

Nevertheless, a $3 billion loss on the bank’s holding in the Chinese Bank of Communications overshadowed the record-breaking annual profit. In afternoon trading, the financial institution’s Hong Kong-listed contributes saw a 3.4% decline. Global banks exposed to the second-largest economy in the world have been impacted by China’s worsening real estate crisis; among its international peers, HSBC has experienced the biggest writedown to date.

According to HSBC, the write-down regarding the lender’s BoCom make occurred following an assessment of the Chinese the financial institution’s projected subsequent years cash flows and prospects for loan growth as well as interest margins in light of China’s less solid than anticipated economic recovery.

October saw rival Standard Chartered suffer a nearly $1 billion loss on its own stake in a China bank as lenders’ profits are being squeezed by expanding loan losses. “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% in 2023,” Mark Tucker, the chairman, said in a release.

HSBC is expected to almost double yearly profits as it dismisses concerns about China.

CAREFUL OUTLOOK, INCREASED COSTS

The largest European lender stated that it is still cautious about the outlook for loan growth in the initial half of 2024 due to the likelihood of slowing growth in the economy in many countries where inflation remained high.

More than anticipated bank taxes in the United States and Great Britain caused costs to rise by 6% in 2023, according to HSBC. In addition, it stated that expenses would increase by an additional 5% in 2024 as it makes investments in its companies and fights inflation.

In 2023, the bank reported a key performance target of 14.6% return on tangible equity (ROTE), falling short of an estimated 17%. The target ROTE for 2024, according to the statement, is still the mid-teens.

Significantly, as the long-term bonuses from his 2020 appointment started to vest, Chief Executive Noel Quinn’s total compensation doubled to $10.6 million in 2023 from $5.6 million the previous year, increasing his variable pay.
HSBC announced that, in recognition of better performance, its bonus pool increased to $3.8 billion from a total of $3.4 billion the previous year. The company also announced the introduction of a new variable pay plan for employees in junior and middle management. The bank with its headquarters in London declared a fourth interim payment of $0.31 each share, for a total of $0.61 per share for 2023.