By Lars Mucklejohn
HSBC is set to nearly double its annual profits on the back of higher interest rates as it shrugs off concerns about its exposure to China’s stagnating economy and stock market.
The Asia-focused giant will report its full-year results next Wednesday, with company-compiled analyst estimates forecasting a surge in pretax profit to $34.1bn (£27.2bn), from $17.5bn (£14bn) in 2022.
Britain’s biggest lenders have benefited from a jump in net interest income (NII) – the difference between what a bank pays out to savers and receives in interest from loans – since late 2021 as the Bank of England hiked borrowing costs in an effort to slow down inflation.
However, the final quarter of 2023 is expected to show more pressure on banks’ net interest margins as rates have likely peaked and lenders come under pressure to offer savers better deals.
HSBC’s NII is estimated to come in around $4bn higher in 2023 at $32.6bn. It used the boon from rate hikes across the world to award £8.4bn in dividends in 2023 – nearly double the £4.4bn it paid in 2022.
The bank last year fought off a campaign led by its biggest investor, Ping An, to split its Asia business into a separate company over concerns about its global business model.
In a sign of investors’ confidence in the bank, Ping An was the only one of HSBC’s top 50 shareholders to vote in favour of a break-up.
The lender has been streamlining its global business model for years to boost shareholder returns, including downsizing in many regions and exiting some entirely.
A major obstacle in recent times has been an economic slowdown in HSBC’s largest geography, China, which has been hit by a commercial real estate crisis and a stock market rout.
Its central bank last month said it would lower how much liquidity banks were required to hold, suggesting a dovish pivot in monetary policy.
However, experts and the International Monetary Fund have called on China to introduce further policy easing to boost its economy.
Chief executive Noel Quinn has repeatedly sought to reassure investors that the worst of the crisis is over and that China is very much open for business, with HSBC’s chair Mark Tucker reportedly meeting vice president Han Zheng last month.
Shareholders appear to remain confident in the bank, and it is the only one of Britain’s Big Four lenders to see its stock rise in the last year, ticking up 2.4 per cent.
