HSBC pre-tax profits slip in 2022

Published February 21st, 2023 - 08:56 GMT
HSBC pre-tax profits slip
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ALBAWABA — Banking giant HSBC Holdings on Tuesday announced a dip in full year 2022 pre-tax profits, even after reporting a 92 percent surge in quarterly profits.


Europe's biggest bank based on assets pledged more regular dividends and share buybacks as reported pre-tax profit included a $2.4 billion impairment due to the planned sale of its retail banking operations in France.


The Asia-focused lender said it made $17.5 billion before tax, down more than 7 percent year-on-year, while reported revenue increased 4 percent to $51.7 billion.


After-tax profits rose $2 billion to $16.7 billion, while fourth-quarter pre-tax profit nearly doubled from $2.5 billion to $5.2 billion.


The London-headquartered noted that renewed COVID-19 outbreaks in Hong Kong and mainland China dented its economic growth last year, along with global uncertainty, rising interest rates and inflationary pressures.


HSBC gains more than many smaller banks from increases in central bank interest rates because having $1.3 trillion in customer deposits allows it to charge a larger margin on its loans and mortgages.


"We are already seeing... a cost-of-living crisis affecting many of our customers and colleagues," Mark Tucker, HSBC Group Chairman said in a statement, expecting the difficult financial environment to spill into 2023 earnings and even eclipse pandemic levels.


"All of our businesses grew profits in 2022, and we maintained our strong capital, funding and liquidity positions," Tucker added. "Overall, I am optimistic about the global economy in the second half of 2023, but there is still a high level of uncertainty due to the Russia-Ukraine war and recessionary fears may yet dominate much of the year ahead."


The bank said last year reflected "a strong overall financial performance" and announced a full-year dividend of $0.32 per share, saying it was establishing a dividend payout ratio of 50 percent for 2023 and 2024.


The bank vowed to accelerate a multi-year pivot to Asia and the Middle East, after selling its Canadian division for $10.1 billion in November, saying it would use the funds to invest in its core business and return cash to investors.


HSBC said it would be taking a $300 million loss from the sale of its Russia business, expecting the transaction to be completed by the end of June.

The bank is focused on delivering a returns target of at least 12 percent for next year as well as keeping costs down, Noel Quinn, HSBC Chief Executive Officer, told Agence France-Presse. "We are on track to deliver higher returns in 2023 and have built a platform for further value creation."


The bank conservatively forecasts net interest income to be at least $36 billion in 2023, shy of $37-$38 billion figure from analyst forecasts partly due to pressure from competitors to raise rates on deposits, among other factors, Quinn told Reuters.


"There will be no easing off at all on costs... We are now considering up to $300 million of additional costs for severance in 2023," Quinn said, as he continues overseeing a program of job cuts aimed at stripping out layers from the bank's bloated management structure.


"We completed the first phase of our transformation and our international connectivity is now underpinned by good, broad-based profit generation around the world," Quinn said in the release.


“We are on track to deliver higher returns in 2023 and have built a platform for further value creation,” Quinn added.


HSBC's London-listed shares are currently trading at their highest in about three and a half years, having risen 20 percent so far this year, while rebounding 45 percent from October 2022 lows.


Shares closed 1.8 percent lower in London at 609.50 British pound sterling and also closed 1.96 percent lower in Hong Kong as investors weighed income forecasts deemed moderate by analysts against an environment of rising global rates.




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