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HSBC: Bank's pre-tax profits soar fuelled by high interest rates – BBC.com

  • Written by Mariko Oi
  • business reporter

image source, Getty Images

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The bank makes most of its profits in Asia, especially China and Hong Kong.

HSBC, Europe’s largest bank, saw its pre-tax profit increase by about 80% thanks to high interest rates, reaching $30.3 billion (approximately 2.4 trillion yen) in 2023.

This comes after central banks around the world have raised interest rates over the past 18 months in a bid to curb rising prices.

However, due to the slowdown in the Chinese economy, HSBC’s profits were not as high as expected.

The company’s earnings were also affected by a huge $3 billion claim on its shares in Bank of Communications Bank of China.

The bank makes most of its profits in Asia, particularly China and Hong Kong.

HSBC’s pre-tax profit in 2022 was expected to be $17.1 billion, which analysts expected would jump to $34.1 billion last year.

However, the company’s chief executive Noel Quinn said: in a statement: “Our record profit performance in 2023 enabled us to reward shareholders with our highest full-year dividend since 2008.”

Banking analyst Francis Coppola told the BBC: “There has been a pretty significant increase in what we call the net interest margin, which is the difference between what we charge borrowers and what we pay depositors.”

“That really was the main driver of both revenue and profit growth,” she added.

“However, we need to keep in mind that the high interest rate environment is coming to an end.”

The London-based lender offered investors another $2 billion in share buybacks.

In addition to three share buybacks totaling $7 billion, Quinn said the bank returned $19 billion to shareholders last year.

Investors are also keeping an eye on HSBC’s exposure to China’s real estate sector, which has been in crisis since 2020.

China, the world’s second-largest economy, has been experiencing a fall in prices known as deflation, and consumers tend to be discouraged from spending in the hopes that goods will become cheaper in the future.

Moody’s economist Harry Murphy-Cruise previously told the BBC: “The Chinese economy just can’t get into gear.” He added: “Investors are calling for the deployment of greater economic support.”

Rival Asia-focused bank Standard Chartered is due to report its results later this week.

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