Issue link: https://maltatoday.uberflip.com/i/1516278
5 NEWS 22.2.2024 HSBC has posted record annual profits on the back of higher interest rates and an- nounced a new $2bn (£1.6bn) share buyback, while its earnings in the final quarter of 2023 were hit by $3bn (£2.4bn) in charges from its stake in a Chinese bank. The Big Four lender, which is headquar- tered in London but makes most of its profits in Asia, reported a pretax profit of $30.3bn (£24.0bn) for last year, soaring 78 per cent from 2022 but undershooting an- alysts' estimates of $34.1bn (£27bn). As well as the buyback it said it would consider a special dividend of $0.21 (16.6p) per share in the first half of 2024 upon the sale of its Canadian business to RBC, which received government approval late last year. The bank announced $7bn (£5.4bn) in buybacks last year and was the UK's high- est dividend-payer, dishing out £8.4bn as its profits soared from interest rate hikes around the world – a tailwind that is dy- ing down as key central banks are likely to keep holding rates before making multiple cuts later this year. HSBC's fourth-quarter earnings were dragged down by $3bn (£2.4bn) in unex- pected charges on its holdings in China's Bank of Communications (BoCom) and $2bn (£1.6bn) from the sale of its French retail banking business. Pretax profit came in at $1bn (£0.8bn) in the final three months of 2023, slumping from $5bn (£4bn) during the same period in 2022. HSBC said the China writedown came after a review of the outlook for BoCom's cash flows, loan growth and interest mar- gins. It took a 19.9 per cent stake in Bo- Com for $1.75bn (£1.4bn) in 2004. "BoCom remains a strong partner in Chi- na, and we remain focused on maximising the mutual value of our partnership," HSBC said. "Our positive views on the medium and long-term structural growth opportu- nities in mainland China are unchanged." The news sent HSBC's shares down 3.8 per cent in Hong Kong and 6.8 per cent in London. China's post-Covid economic stagnation, fuelled by a commercial real estate crisis, has sparked concern among investors in Asia-focused banks like HSBC and Stand- ard Chartered. Despite repeatedly insisting that the worst of the crisis is over, HSBC set aside $200m last quarter to cover potential loss- es. "China's recovery after reopening was bumpier than expected, but its econo- my grew in line with its annual target of around five per cent in 2023," said HSBC chair Mark Tucker on Wednesday. The bank is in the process of investing more in Asia's fast-growing insurance and wealth management sectors while exiting less profitable businesses in its other geog- raphies. HSBC also announced an interim divi- dend of $0.31 per share for the fourth quar- ter, bringing the total for 2023 to $0.61 per share. The bank posted a 14.6 per cent return on tangible equity (RoTE) in 2023, under- shooting estimates of 17 per cent. HSBC maintained its aim for a RoTE in the mid- teens for this year. Its costs grew by a more-than-expected six per cent last year due to high levies in the UK and US, while it expected costs to rise another five per cent this year, driven by inflation and increased investment. HSBC's bonus pool has risen to $3.8bn from $3.4bn year-on-year, while Quinn's total pay doubled to $10.6m in 2023. Analysts at Jefferies said in a note: "What matters for the shares today are the com- mitment to a mid-teens RoTE for 2024 (at worst, in-line consensus expectations) and a $2bn buyback reload. These price-sensi- tive points come amidst a messy Q4 print and some unclear guidance detail for 2024. "Working back from the mid-teens guid- ance, we see a baseline picture of un- changed consensus earnings. In terms of Q4 results themselves, we estimate 'clean' [pretax profit] was five per cent ahead." Globally, HSBC unveils record annual profits and fresh buyback Q4 2023 earnings hurt by $3 billion in charges from stake in Chinese bank FROM PAGE 1 HSBC's pre-tax profits repre- sent an increase of €78.3 million or 141% on the previous year. It comes on the back of higher in- terest rates. e bank will pay €47.1 million in tax, €27.7 million more than 2022. Reported profit after tax attrib- utable to shareholders is of €86.8 million, resulting in earnings per share of 24.1c, compared with 10c in the same period in 2022. e annual report and accounts approved by the board of direc- tors show that the higher profits were driven by higher interest rates and higher profits from the insurance subsidiary. e bank had a return on equity of 17.1%, up from 7.7% in 2022. Net loans and advances to customers decreased by €91.3 million to €3 billion compared to December 2022. Customer deposits increased by 3% to €6.1 billion driven by an increase in commercial deposits. e bank maintained a healthy advanc- es-to-deposits ratio of 50.2%. Operating costs for 2023 in- creased by 3% and amounted to €102.4 million. Higher expens- es were mainly attributable to an increase in staff costs of €3.7 million. is was partially offset by an insurance refund received in 2023 and cost savings on the bank's real estate portfolio. e bank's common equity tier 1 capital stood at 20.6% in De- cember 2023, compared to 18.5% at the end of 2022. e total cap- ital ratio increased to 23.5% com- pared to 21.3%. Geoffrey Fichte, CEO at HSBC Bank Malta, said the record profit performance in 2023 re- flected the "inherent strength" of the bank's business and balance sheet. "Our lines of business, com- mercial banking, wealth and per- sonal banking and global mar- kets, continue to grow from their respective areas of strength and are looking to grow by support- ing customers and maximising sustainable finance opportuni- ties, leveraging our international advantage, maintaining proactive cost management and a robust risk management culture," Fichte said. He added that the dividend pay-out for the interim finan- cial results in August was high- er than the full dividend paid in 2022. "Our share price was the top performer in the Malta Stock Exchange in 2023, increasing by over 80%. Today we announced one of the highest annual divi- dend paid in the last decade." HSBC's 2023 pre-tax profits an increase of €78.3 million on 2022 Geoffrey Fichte, CEO at HSBC Bank Malta, said the record profit performance in 2023 reflected the "inherent strength" of the bank's business and balance sheet In Brief • Increased profits driven by higher interest rates and higher profits from the insurance subsidiary. Operating costs increased mainly driven by investment in people and technology. • Recommended a final gross dividend of 9.0 cents per share (5.85 cents per share net of tax) which brings the total dividend for 2023 to 15.0 cents (9.75 cents net of tax). • Cost efficiency ratio of 44 % compared to 6 8% in 2022. • Reported profit after tax attributable to shareholders of €86.8m for the year ended 31 December 2023 , resulting in earnings per share of 24.1 cents, compared with 10.0 cents in the same period in 2022. • Return on equity of 17.1 % compared with 7. 7 % for 2022.