HSBC posts record profits, misses expectations due to China write-offs By Reuters

© Reuters. FILE PHOTO: The HSBC Bank logo is seen in this picture taken on March 12, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

Selena Lee and Lawrence White

HONG KONG/LONDON (Reuters) – HSBC Holdings reported a record annual profit, but it was nonetheless below analysts’ forecasts as income gains from higher interest rates were offset by a hefty $3 billion charge from the Chinese bank’s stake.

HSBC, which has a market value of $160 billion, announced Wednesday that its 2023 pre-tax profit would be $30.3 billion, up 78% from $17.5 billion in the same period last year. The result was worse than the average broker estimate compiled by HSBC of $34.1 billion.

The British lender rewarded investors with $2 billion in new share buybacks and said it would consider a special dividend of $0.21 per share in the first half of 2024 once the Canadian sale is completed.

But the record annual profit was marred by a $3 billion impairment charge to the Bank of China’s stake in the bank.

HSBC said the write-down of the lender’s BoCom stake was made after reviewing the Chinese bank’s future cash flows and outlook for loan growth and interest margins amid a more volatile economic recovery in China than expected.

The large write-down comes after rival Standard Chartered (OTC:) took a nearly $1 billion hit to its own Chinese bank stake in October as widening loan losses squeezed the lender’s profits.

“China’s recovery since reopening (post-pandemic) has been stronger than expected, but the economy has grown in line with our annual target of approximately 5% for 2023,” Chairman Mark Tucker said in a press release.

Europe’s largest lender said it remained cautious about its outlook for lending growth in the first half of 2024 as it braces for slower economic growth in many countries where inflation persists.

HSBC said its bonus pool had increased to $3.8 billion from $3.4 billion a year ago to reflect improved performance, and it would also launch a new variable pay scheme for mid-level and mid-level executives.

The London-based bank announced a fourth interim dividend of $0.31 per share, bringing the total dividend for 2023 to $0.61 per share.