HSBC sinks 7% after Q4 profit slump

HSBC (HSBA.UK) is one of the worst performing stocks listed on the London Stock Exchange today after bank reported a massive 81% slump in Q4 pretax profit. However, pretax profit actually increased on the full-year basis.

Q4 2023 results from HSBC have been weakish. Revenue dropped, driven by a big plunge in Wealth & Personal Banking revenue. Drop in operating expenses was much smaller than drop in revenue. Pretax profit of $977 million was over 80% lower than $5.05 billion reported in a year ago quarter. However, this drop came from two one-off items - a $3 billion charge HSBC booked on its holding in China's Bank of Communications, as well as a $2 billion charge the bank took on the sales of its French retail operations.

Full-2023 results were a slight miss when it comes to total revenue and pretax profit. However, the bank has still managed to significantly increase its sales and profits from 2022, thanks to a positive impact of higher interest rates. HSBC announced that it will purchase own shares worth up to $2 billion and is considering a special dividend of $0.21 per share in the first half of 2024. Dividend payout ratio target was left unchanged at 50% for 2024.

HSBC also said that it expects net interest income of at least $41 billion in 2024, what would mark a drop from $44.1 billion reported for 2023. Bank said it has cautious outlook for loan growth in the first half of 2024.

Q4 2023 earnings

• Revenue: $13.02 billion (-11% YoY)
  • Wealth & Personal Banking: $4.36 billion (-36% YoY)
  • Commercial Banking: $5.23 billion (+9.3% YoY)
  • Global Banking & Markets: $3.73 billion (+12% YoY)
• Operating expenses: $8.65 billion (-1.5% YoY)
• Pretax profit: $977 million (-81% YoY)
• Change in expected credit losses: $1.03 billion
• Net interest margin: 1.52% vs 1.68% a year ago

Full-2023 results

• Revenue: $66.06 billion vs $66.69 billion expected (+31% YoY)
  • Wealth & Personal Banking: $27.28 billion (+31% YoY)
  • Commercial Banking: $22.87 billion (+40% YoY)
  • Global Banking & Markets: $16.11 billion (+10% YoY)
• Pretax profit: $30.35 billion vs $34.12 billion expected (+78% YoY)
• Common Equity Tier 1 ratio: 14.8% vs 14.5% expected (14.2% a year ago)

HSBC (HSBA.UK) is plunging over 7% today after reporting Q4 profit slump and providing a vague outlook for full-2024. Stock plunge from the upper limit of the ongoing trading range in the 6.45 GBP area and is trading around 2% above the lower limit of the range in the 5.825 area. A break below 5.825 support could trigger a share price drop to as low as 5.20 GBP.

Source: xStation5