HSBC’s $3 billion China writedown mars record annual profit

By Selena Li and Lawrence White

HONG KONG/LONDON (Reuters) -HSBC Holdings reported a record annual profit, that nonetheless came in below analysts’ forecasts as the income boost from higher interest rates was offset by a hefty $3 billion charge from its stake in a Chinese bank.

HSBC, which has a market value of $160 billion, reported on Wednesday a pretax profit of $30.3 billion for 2023, up 78% from a year earlier but worse than a $34.1 billion broker estimate.

The British lender rewarded investors with a fresh $2 billion share buyback, and said it would consider a special dividend of $0.21 per share in the first half of 2024 once its Canada disposal is complete.

However, the record-high annual profit was marred by a $3 billion impairment on the bank’s stake in China’s Bank of Communications.

The bank’s Hong Kong-listed shares fell 3.4% in afternoon trade.

China’s deepening real estate crisis has had a ripple effect on global banks with exposure to the world’s No.2 economy, with HSBC taking the largest writedown so far among foreign peers.

The writedown in the lender’s BoCom stake came after a review of the Chinese bank’s likely future cash flows and outlook for loan growth and interest margins, HSBC said, amid China’s shakier-than-expected economic recovery.

Rival Standard Chartered in October took a nearly $1 billion hit on its own China bank stake, as widening loan losses compress lenders’ profits.

“China’s recovery after reopening (following the pandemic) was bumpier than expected, but its economy grew in line with its annual target of around 5% in 2023,” Chairman Mark Tucker said in a release.

CAUTIOUS OULOOK, COSTS RISE

The biggest European lender said it remains cautious for the loan growth outlook in the first half of 2024, against slowing economic growth in many economies where inflation persisted.

HSBC said costs grew 6% in 2023, more than it had forecast, due to the impact of higher-than-expected bank levies in the U.S. and Britain. It also said costs would grow…