HSBC Sees Surge in Pre-Tax Profit Amid Global Interest Rate Hikes
Europe’s largest bank, HSBC, witnessed a staggering 80% surge in its pre-tax profit, reaching $30.3 billion (£24 billion) in 2023, driven by elevated interest rates globally.
Central banks worldwide have raised interest rates over the past 18 months to combat escalating inflationary pressures, contributing to HSBC’s robust financial performance.
NatWest, a competitor, recently disclosed its highest annual profit since the 2007 financial crisis, signalling a positive trend in the banking sector.
However, HSBC’s profit growth was tempered by a deceleration in China’s economic expansion, falling short of analysts’ lofty expectations. A substantial $3 billion charge from its stake in China’s Bank of Communications also weighed on its bottom line.
The bank’s revenue stream predominantly originates from Asia, particularly China and Hong Kong, where it commands a significant market presence.
Although analysts anticipated a surge to $34.1 billion in 2023 from $17.1 billion in pre-tax profit in 2022, CEO Noel Quinn emphasised the bank’s record profit performance, enabling the highest full-year dividend payout since 2008.
Frances Coppola, a banking analyst, attributed HSBC’s revenue and profit surge to an expanded net interest margin and the disparity between borrowing charges and depositor payouts, driven by elevated interest rates.
Despite the impressive financial results, concerns loom as the era of high interest rates approaches its end, potentially impacting HSBC’s future profitability.
To reward shareholders, HSBC unveiled a new $2 billion share buyback, augmenting the $7 billion allocated through three previous repurchase programs.
The bank’s exposure to China’s property sector remains under scrutiny amid the sector’s turmoil since 2020, highlighted by Evergrande’s recent liquidation order in Hong Kong.
As China grapples with deflationary pressures and sluggish economic growth, investors seek substantial economic stimuli to rejuvenate the economy, observed Moody’s economist Harry Murphy Cruise.
Standard Chartered, a competitor focused on Asia, is set to unveil its financial performance later this week, further shaping the narrative of the banking landscape in the region.
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