HSBC reports a record annual profit, but experiences a write-down on China, causing shares to fall 7%.

• In 2023, HSBC's pre-tax profit increased by approximately 78% to $30.3 billion compared to the previous year. However, the bank's earnings fell short of the median analyst estimates of $34.06 billion, as tracked by LSEG.
• Noel Quinn, the Chief Executive, declared an additional share buyback of up to $2 billion to be completed by the bank's next quarterly report.

On Wednesday, analysts' estimates for the lender's full-year 2023 pretax profit were missed, resulting in a 7% decline in its London-listed shares due to impairment costs linked to its stake in a Chinese bank.

In 2023, Europe's largest bank by assets experienced a 78% increase in pre-tax profit to a record $30.3 billion, despite missing median estimates of $34.06 billion from analysts tracked by LSEG.

Noel Quinn, the Chief Executive of HSBC, announced an additional share buyback of up to $2 billion to be completed before the bank's next quarterly earnings report. Additionally, HSBC stated that it would consider offering a special dividend of 21 cents per share in the first half of 2024 after it completes the sale of its Canada business.

Last year, the bank returned $19 billion to shareholders through dividends and share buy-backs.

In 2023, Quinn's salary increased from $5.6 million to $10.6 million, thanks in part to long-term incentives since his appointment in 2020.

HSBC experienced a "valuation adjustment" of $3 billion on its 19% stake in China's Bank of Communications, according to Quinn. In an interview with CNBC, he stated that this is a "technical accounting adjustment" and not a reflection on BoComm's performance.

The write-down contributed to a 80% decrease in the bank's fourth-quarter pretax profit, which dropped from $1.1 billion to $1 billion compared to the previous year.

Hong Kong shares of HSBC reversed gains of approximately 1% after trading resumed, falling as much as 5%. Meanwhile, the benchmark was up about 2%. In London, shares were down around 7% in early deals, set for their biggest one-day drop since 2020, according to Reuters.

The bank's full year 2023 financial report card includes other highlights.

• The revenue for 2023 was $66.1 billion, which is 30% higher than the median LSEG forecast of approximately $66 billion.
• In 2022, the net interest margin was 1.48% — lower than the 1.66% recorded in the previous year.
• The common equity tier 1 ratio of the bank, which indicates the relationship between its capital and assets, was 14.8% in 2023, higher than the 14.2% recorded in 2022.
• In 2023, the basic earnings per share was $1.15, which is lower than the median LSEG forecast of $1.28 and the 2022 forecast of 75 cents.
• Since 2008, the highest dividend per ordinary share was 61 cents, which is higher than the 32 cents paid in 2022.

Outlook 2024

HSBC, with its base in Hong Kong, stated that it is concentrating on the rapidly expanding regions of Asia, where the bank generates the majority of its earnings.

The bank announced that it has sold its businesses in France, Oman, Greece, and New Zealand, and is currently in the process of exiting Russia, Canada, Mauritius, and Armenia.

The bank identified two significant macroeconomic trends: a decline in interest rates as inflation decreases, which may reduce its interest income, and a shift in global supply chains and trade.

Corporates and institutions aim to expand and develop, particularly mid-market corporates, which HSBC is well-suited to serve. Despite some de-globalization tendencies, the world is re-globalizing as supply chains shift and intraregional trade flows increase, as stated by Quinn in the earnings statement.

The bank aims to achieve a mid-teens return on tangible equity of approximately 14.5% in 2024, which was the same as last year.

HSBC announced that it will prioritize the growth of non-interest income through its wealth and transaction banking operations, with a goal of achieving at least $41 billion in banking non-interest income by financial year 2024.

HSBC is cautious about the loan growth outlook for the first half of 2024 due to economic uncertainty, anticipating a mid-single digit annual percentage growth over the medium to long term.