HSBC Reports Surge in Pre-Tax Profits Driven by High Interest Rates

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HSBC, Europe’s largest bank, has announced a remarkable nearly 80% increase in pre-tax profit, soaring to $30.3 billion (£24 billion) in 2023, buoyed by elevated interest rates.
The surge in profits follows a series of interest rate hikes by central banks globally over the past 18 months, aimed at curbing inflationary pressures.
While rival lender NatWest recently disclosed its highest yearly profit since the 2007 financial crisis, HSBC’s profit growth was tempered by a slowdown in China’s economy and a significant $3 billion charge related to its stake in China’s Bank of Communications.
The majority of HSBC’s profits are derived from Asia, particularly China and Hong Kong. Analysts had anticipated the bank’s pre-tax profit to reach $34.1 billion in 2023, up from $17.1 billion in 2022.
HSBC’s CEO, Noel Quinn, highlighted the record profit performance, which enabled the bank to provide its highest full-year dividend since 2008. The surge in profits was chiefly driven by an increase in net interest margin, the difference between interest charged on loans and interest paid on deposits.
Despite the robust performance, banking analyst Frances Coppola cautioned that the high interest rate environment is approaching its conclusion.
In a bid to reward shareholders, HSBC initiated a new $2 billion share buyback, adding to three previous buybacks totaling $7 billion. Quinn noted that the bank returned $19 billion to shareholders in the preceding year.
Investors remain vigilant regarding HSBC’s exposure to China’s property sector, which has grappled with crisis since 2020. China’s economy has faced deflationary pressures, contributing to subdued consumer spending and investor concerns.
Moody’s economist Harry Murphy Cruise underscored the challenges facing China’s economy, emphasizing the need for substantial economic support measures.
Attention now turns to rival Asia-focused bank Standard Chartered, set to unveil its financial results later this week, amidst evolving market dynamics and economic uncertainties in the region.