The share price of HSBC Holdings slumped by more than 8% in London as the UK's biggest bank left investors disappointed with the profits reported for the final three months, and for all of 2023.
ADVERTISEMENTPretax profit for the final three months of the year fell to $1 billion (€920 million) from more than $5 billion (€4.62 billion) the previous year, mainly due to two major expenses; $3 billion (€2.77 billion) to pay for an impairment charge relating to the investment in the Chinese Bank of Communications Co. and another $2 billion (€1.85 billion) relating to the sale of the lender's retail banking operations in France.
This completely took the attention off the otherwise record pretax profits reported for the full year, reaching $30.3 billion (€28 billion) in 2023. The final figure, however, still fell short of analysts' expectations.
HSBC also announced a fresh $2 billion share buyback, while the pay of the bank's CEO doubled in 2023 from the previous year.
Richard Hunter, head of markets at Interactive Investor, commented: "HSBC has again flexed its financial muscles with a leap in profits, despite an ugly final quarter which was marred by a large impairment relating to its Chinese operations."
Hunter also noted how the benefits of higher interest rates had a particularly positive effect on the HSBC balance sheet, and revenues represented an increase of 30% on the previous year, largely driven by a spike in net interest income (NII).
"Within the number, there were some particularly strong unit performances, such as Commercial Banking, which saw a revenue increase of 76%, and Global Banking and Markets, which improved 26% on the corresponding period," Hunter said.
The analyst also noted the impairments for the year, which he said reflected some specific caution on the group's Chinese commercial property exposure.
"Despite the overall strength of the numbers, the share price reaction overnight highlighted some of the concerns which the group is likely to be facing in the coming months.
"The likely reduction of interest rates globally could remove a plank from a core growth area of late, while the rather messy performance in the fourth quarter could potentially lead to some rather more negative momentum.
"Indeed, in the group's own outlook, HSBC is forecasting slow growth for the first half of the year, followed by a gradual recovery, while inevitably the parlous state of the Chinese economy in general and the real estate sector in particular are ominous headwinds," Hunter added.
