HSBC Navigates Choppy Waters: Booming 2023 amidst emerging challenges; Economic, political challenges loom in China
HSBC Holdings Plc boss Noel Quinn displayed a bullish stance for the year just gone as the lender profited from rising interest rates. With Europe’s largest bank — which makes most of its profit in Asia estimated to report strong earnings for 2023 this week, Quinn appeared at ease in his role at the gathering late last year in Windsor. He signalled keenness to steer the lender in the medium term, people familiar with the matter said, according to a report by Bloomberg.
But he also warned his team of tougher times ahead, they said, asking not to be identified discussing internal matters.
After riding the tide of rising interest rates over the past 18 months like many of its peers, HSBC is bracing for headwinds in 2024. While the peaking of the cycle implies an end to rates-driven earnings growth, the troubles in its key markets of China and Hong Kong point to serious challenges. US-China tensions over trade or Taiwan could also some day worsen — potentially undermining firms that that have spent decades building their businesses there.
“A bank can only be as strong or weak as their customers and the economy in which they operate,” said Mark Williams, a master lecturer in the Finance Department at Boston University. Doubling down on China at a time of growing crisis and a faltering economy puts HSBC “in a vulnerable earnings position for at least the next year,” he said.
A representative for HSBC, which is scheduled to announce its earnings on Feb. 21, declined to comment.
For 2023, analysts tracked by Bloomberg estimate HSBC will report net revenue of about $65.5 billion, up 27% from 2022, and net interest income of $37.4 billion.
HSBC is expected to unveil roughly $2 billion in share buybacks, according to analysts at UBS Group AG, following $7 billion in stock repurchases it announced last year.
The analysts are also anticipating an update on the sale of HSBC’s Canadian business and potentially a special dividend in the second quarter of this year, according to a note to clients on Feb. 12. The Canadian government approved Royal Bank of Canada’s $10 billion deal to acquire HSBC’s Canadian operations in December.
(With Inputs from Bloomberg)
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Published: 19 Feb 2024, 11:47 AM IST
Ganesh
http://ganesh@finplay.inFinance enthusiast, Mutual fund expert.