HSBC Holdings PLC on Wednesday announced further share buybacks as annual profit soared on the back of higher interest rates, though its fourth-quarter performance suffered due to an impairment.

The Asia-focused lender said pretax profit in 2023 surged 78% to $30.35 billion from $17.06 billion.

Total revenue rose 30% to $66.06 billion, from $50.62 billion. HSBC said this was driven by an increase in net interest income from all three of its global businesses, reflecting the higher interest rate environment. Net interest income rose 18% to $35.80 billion from $30.38 billion, while the net interest margin improved to 1.66% from 1.42%.

In addition, non-interest income increased by $10 billion, thanks to increased trading and $6.4 billion in fair value income, mostly in Global Banking and Markets.

Profit also got a boost from the sale of its retail banking operations in France, and the acquisition of Silicon Valley Bank UK Ltd.

In the fourth quarter, net operating income fell 11% to $13.02 billion from $14.57 billion a year before, while profit dropped 81% to $977 million from $5.05 billion, partly due to a $3.0 billion impairment related to its investment in Shanghai-based BoCom.

HSBC said it has approved a fourth interim dividend of $0.31 per share, bringing the total dividend to $0.61 per share, almost double that of $0.32 in 2022. HSBC also said it will begin a share buyback of up to $2.0 billion, which it expects to complete by the announcement of its first quarter results.

‘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,’ said Chief Executive Officer Noel Quinn.

For 2023, the bank’s common equity tier 1 capital ratio improved to 14.8% from 14.2% in 2022, thanks to higher capital generation, which was partially offset by dividends and share buybacks. Return on tangible equity was 14.6%, compared to 10.0% in 2022. Excluding strategic acquisitions and the BoCom impairment, RoTE improved to 15.6% from 11.3%.

Looking ahead, HSBC said it continues to target a return on average tangible equity in the mid-teens for 2024, excluding notable items. It expects banking net interest income of at least $41 billion. While its outlook for loan growth is ‘cautious’ for the first half of the year, it expects customer lending growth in the mid-single digits over the medium to long term.

‘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,’ CEO Quinn continued.

Shares in HSBC dropped 3.2% to HK$60.65 in Hong Kong on Wednesday afternoon.

Copyright 2024 Alliance News Ltd. All Rights Reserved.