ii view: HSBC had a record year but what will 2024 bring?

Full-year results to 31 December

• Revenue up 30% to $66.1 billion (£52 billion)
• Pre-tax profit up 78% to $30.3 billion (£23.6 billion)
• Capital cushion or CET1 ratio of 14.8%, up from 14.7% in late June
• Fourth interim dividend of $0.31 per share 
• Total 2023 dividend of $0.61, up from $0.32 in 2022
• New share buy-back of up to $2 billion

Chief executive Noel Quinn 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 $7 billion, and a further share buy-back of up to $2 billion. This reflected four years of hard work and the strength of our balance sheet in a higher interest rate environment. 

“We have a strong platform for growth with the opportunities that exist within our two home markets and across our international wholesale, market-leading transaction banking, and wealth management businesses. We are focused on capturing these growth opportunities, improving our earnings sustainability and targeting mid-teens returns in 2024.”

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ii round-up:

Founded in 1865 in Hong Kong and now headquartered in London, HSBC Holdings (LSE:HSBA) serves over 40 million customers in more than 60 countries and territories worldwide. 

It operates across the three arenas of Wealth and Personal Banking, Commercial Banking, and Global Banking and Markets.

For a round-up of these latest results announced on the 21 February, please click here.

ii view:

HSBC is one of the world’s largest banking and financial services organisations. Its stock market value of around £113 billion stands comfortably ahead of UK headquartered rivals Lloyds Banking Group (LSE:LLOY), Barclays (LSE:BARC), and NatWest Group (LSE:NWG) all at under £35 billion. Its Hong Kong and Shanghai Banking business generated its biggest slug of profit last year at 53%, followed by the UK at 27%. Elsewhere, the Middle East accounted for 4% and North America under 5%. 

For investors, the economic outlook for China as well as HSBC’s own expectations of slow loan growth in the first half of 2024 are reason for caution. Political tensions between the USA and China also remain elevated, with the latest move a potential block of Chinese company TikTok from doing business in the US. Expected cuts in interest rates during 2024 are likely to reduce interest income on loans made, pressuring revenues, while some regional diversity has been lost with exits from some countries.   

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On the upside, some bad debt provisions for potential difficulties in China have already been made, and the group’s track record on this is generally pretty prudent. Ongoing investment in technology and digital services should bring reward later down the line, previous acquisitions such as those for Citi’s retail wealth business in China and Silicon Valley Bank in the UK, should help push future growth, while the bank’s balance sheet looks robust.

For now, and despite grounds for caution, continued share buybacks and a forecast dividend yield of over 9% should be sufficient to leave long-term fans of this well managed bank sitting tight. 

Positives: 

• Robust balance sheet
• Attractive dividend yield (not guaranteed)

Negatives:

• Uncertain economic outlook
• Heightened political tensions between the West and China

The average rating of stock market analysts:

Strong hold