HSBC announces record £24bn profit boosted by interest rates

High interest rates which saw customers pay more for loans and mortgages fuelled record profits of $30.3bn (£24bn) at HSBC bank.

Bumper profits at the London-based bank which generates most of its revenue in Asia, would have been even greater but enjoyed even greater profits but for slower growth in China, its main market.

Its profits were also boosted by its emergency rescue of Silicon Valley Bank UK during the banking crisis last year.

Despite the profits, HSBC noted the effects of China’s slower-than-expected economic recovery after the pandemic, greater regional political tensions and a crisis in the property market. Last month, a court in Hong Kong ordered the liquidation of debt-laden property group Evergrande.

Its profit in the final quarter was down in part due to a $3bn charged incurred by its stake in the Chinese Bank of Communications. A review of that bank questioned its likely future cash flows and growth of its loan business.

It announced a $2bn share buyback and increased dividend rewards for its shareholders. A further, special payout to shareholders was being considered once it had completed the sale of its Canadian banking business.

HSBC also revealed a new pay scheme for junior and middle-tiered staff.

Bank chief executive Noel Quinn, whose own pay nearly doublted to £10.6m under a new deal, said: “Our record profit performance in 2023 enabled us to reward our shareholders with our highest full-year dividend since 2008, three share buy-backs last year totalling $7bn and a further share buy-back of up to $2bn.

“This reflected four years of hard work and the strength of our balance sheet in a higher interest rate environment. We are focused on capturing these growth opportunities, improving our earnings sustainability and targeting mid-teens returns in 2024.”

He said the bank remains “confident in the resilience of the Chinese economy, and the growth opportunities in mainland China over the medium to long term”.

Mark Tucker, HSBC’s chairman said China’s recovery after the pandemic reopening was “bumpier than expected”, and that the five per cent growth target of the world’s second-largest economy is expected to be maintained this year.

HSBC reported expected credit losses of $3.4bn in 2023, which included charges “notably related to mainland China commercial real estate exposures”.

Matt Britzman, equity analyst at Hargreaves Lansdown, said that mainland China remains a question mark for HSBC and that its outlook looked somewhat worse than expected.

He said “2023 was a strong year for HSBC, but earnings momentum looks to be coming to an end and things are set to get tougher from here”.

Analyst Richard Hunter, of interactive investor, said: “HSBC is managing to shield itself from economic attack through its sheer size, while also remaining mindful on the importance of continuing to grow the business, especially in areas where it has particular strength.

“The likely reduction of interest rates globally could remove a plank from a core growth area of late. HSBC is forecasting slow growth for the first half of the year, followed by a gradual recovery, while inevitably the parlous state of the Chinese economy in general and the real estate sector in particular are ominous.”