HSBC Reports Fourth Quarter Pretax Profit of $5.2 Billion

On Tuesday, HSBC reported fourth-quarter 2022 results, beating analysts' expectations.

Bank's reported pre-tax profit for the three months ending December was $5.2 billion, up 108% from $2.5 billion a year earlier and better than the bank's estimate of $4.97 billion.

HSBC said its fourth-quarter results reflected strong revenue growth and lower operating costs.

Total revenue for 2021 was $51.73 billion, up from $49.55 billion in 2021. The bank's 2022 reported pre-tax profit fell to $17.

$53 billion versus $18.91 billion a year ago. He said pre-tax profit reported for 2022 included $2.4 billion in impairment from the sale of retail banking operations planned in France.

HSBC, Europe's largest bank by assets, said rising global interest rates bolstered the company's confidence in meeting its 2023 target of at least a 12% return on average tangible capital.

“We have completed the first phase of our transformation and our international connections are now underpinned by extensive and good revenue generation around the world,” Group CEO Noel Quinn said in a press release.

“We are moving towards higher returns in 2023 and we have built a platform for more value creation,” he said.

Banks around the world posted strong net interest income as central banks around the world raised interest rates to curb inflation. HSBC said it expects net interest income of at least $36 billion in 2023.

Hong Kong-listed HSBC shares were down about 1% prior to the announcement, but were down nearly 2% in the afternoon.

Here are other highlights from bank financial reports:

Expected credit losses of $3.6 billion in claims in 2022 reflect increased economic uncertainty, rising interest rates and developments in China's real estate sector. Net interest margin, a measure of the yield on loans, rose 28 basis points to 1.48% in 2022, reflecting higher interest rates.

HSBC's Board of Directors approved a second interim dividend of 23 cents per share, bringing the total dividend to 32 cents per share for 2022.

Special Dividend In addition to the second interim dividend of 23 cents per 4,444 shares, the bank said it is considering paying a special dividend of 21 cents per share after completing the sale of the banking business in Canada. HSBC said payments would be made in early 2024 if the transaction closes in late 2023 as expected. We aim to reach pre-COVID dividend levels within this year.

"The math gives the answer for a dividend of about 50 cents in 2023, which is kind of pre-pandemic level," Quinn said.

“If we deliver on these promises this year, is that 50 cents is on a payout ratio of 50%.”

“What we now have is a much healthier balance of return generation in yields for our shareholders, plus an ability to retain profits for growth, and if that growth isn’t there, then we have buyback capacity as well,” he said.

Rosy outlook for China

Mark Tucker, HSBC’s group chairman, said the global economy still faces many macroeconomic headwinds.

“The pandemic, high inflation and interest rates, and the Russia-Ukraine war all have implications for the global economy, including volatility in markets, supply chain disruption, pressure on small and medium-sized business and squeezes on the cost of living,” he said in a statement.

“Different economies also now face different challenges and have different opportunities in 2023,” he said.

Tucker also reiterated the HSBC economist's forecast of 5% growth in China in 2023.

"The opening of China and a series of measures to stabilize the real estate market will give a significant boost to the economy and the global economy, despite short-term volatility," he said.

He said that unlike Asia, Europe is Russia. "We are likely to face roadblocks from war-induced energy price hikes in Ukraine," said Tucker, who also said the economy would be relatively shallow should it enter a recession.

“In general, 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 Russo-Ukrainian war and recession fears could dominate most of next year,” he said.