HSBC led the London market lower on Wednesday after a $3 billion hit to its operations in China saw the banking giant’s quarterly profits dive 80%. Shares in the U.K.-based lender
HSBA,
-8.28%
HSBC,
+1.31%,
which makes most of its earnings in Asia, fell 7% after saying it would take a $3 billion impairment on its stake in China’s Bank of Communications.
HSBC also said it would also add $200 million to its reserves to cover expected credit losses from commercial property in mainland China, taking the 2023 total to $1 billion. The charges left profits for the fourth quarter of 2023 at $1 billion, down from $5 billion for the same three months in 2022. However, higher interest rates helped HSBC to a full year 2023 record pre-tax profit of $30 billion, up 78% from the previous year — though this was below analysts’ forecasts of $34 billion. HSBC’s exposure to China comes at a time when the world’s second-biggest economy is facing slow growth amid weak consumer sentiment as the once booming property sector continues to deflate. However, HSBC CEO Noel Quinn, said the bank was “a committed investor into China . . . and [we] remain confident on the economy.” “Exposure to Asia has given HSBC a different growth profile than its U.K.-focused counterparts but it brings risk too and that is writ large in its fourth quarter and full year results,” said Danni Hewson, head of financial analysis at AJ Bell. “It is worth saying that the write downs announced today are accounting decisions and have zero impact on HSBC’s capital ratios or ability to dole out cash to shareholders,” added Hewson, as she noted that the lender also announced a $2 billion share buyback. Alistair Ryan, analyst at Bank of America, was also sanguine about the “one-time charges” and welcomed H …
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HSBA,
-8.28%
HSBC,
+1.31%,
which makes most of its earnings in Asia, fell 7% after saying it would take a $3 billion impairment on its stake in China’s Bank of Communications.
HSBC also said it would also add $200 million to its reserves to cover expected credit losses from commercial property in mainland China, taking the 2023 total to $1 billion. The charges left profits for the fourth quarter of 2023 at $1 billion, down from $5 billion for the same three months in 2022. However, higher interest rates helped HSBC to a full year 2023 record pre-tax profit of $30 billion, up 78% from the previous year — though this was below analysts’ forecasts of $34 billion. HSBC’s exposure to China comes at a time when the world’s second-biggest economy is facing slow growth amid weak consumer sentiment as the once booming property sector continues to deflate. However, HSBC CEO Noel Quinn, said the bank was “a committed investor into China . . . and [we] remain confident on the economy.” “Exposure to Asia has given HSBC a different growth profile than its U.K.-focused counterparts but it brings risk too and that is writ large in its fourth quarter and full year results,” said Danni Hewson, head of financial analysis at AJ Bell. “It is worth saying that the write downs announced today are accounting decisions and have zero impact on HSBC’s capital ratios or ability to dole out cash to shareholders,” added Hewson, as she noted that the lender also announced a $2 billion share buyback. Alistair Ryan, analyst at Bank of America, was also sanguine about the “one-time charges” and welcomed H …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]