Shares of HSBC Holdings (GB:HSBA) (HK:0005) dived nearly 8% in early trade after the banking giant’s results disappointed investors. Pre-tax profits jumped 78% year-over-year to $30.3 billion in Fiscal 2023 but came below analysts’ consensus. CEO Noel Quinn announced a new share buyback plan of up to $2 billion, which failed to draw much enthusiasm from investors.
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Furthermore, the board approved a Q4 interim dividend of $0.31 per share, taking the total Fiscal 2023 dividend to $0.61 per share, the highest since 2008.
Details About HSBC’s Full-Year Results
Profits of Europe’s largest bank were impacted by a one-time impairment charge of $3 billion from its 19% equity investment in China’s Bank of Communications Co (BoCom). Even so, Noel said that the impairment was only “a technical accounting adjustment” and did not represent any real downturn in BoCom. The charge dragged down HSBC’s Q4 profits by 80% year-over-year to $1 billion. Q4 revenues also declined 11% year-over-year to $13 billion owing to the impairment of the sale of its retail banking unit in France.
On a positive note, full-year revenue grew 30% to $66.1 billion while net interest margin (NIM) improved to 1.66% from 1.48% in 2022, thanks to a high interest rate environment. Also, the bank’s Common Equity Tier 1 ratio rose to 14.8% in 2023 (14.2% in 2022).
HSBC’s Outlook
Looking ahead, HSBC is forecasting net interest income (NII) of at least $41 billion in Fiscal 2024, which could come under pressure as central banks are expected to reduce interest rates soon. Meanwhile, non-interest income could benefit from solid performance in the bank’s wealth and transaction banking businesses.
HSBC intends to offer a special dividend of $0.21 per share in the first half of 2024, subject to the sale of its Canada business. The bank is on track to streamline its operations, given the completion of the sale of units in France, Oman, Greece, and New Zealand and the ongoing procedures of selling its units in Russia, Canada, Mauritius, and Armenia.
In separate news, Quinn’s pay almost doubled to $13.4 million (GBP10.6 million) in 2023, one of the highest in the industry. The bank also raised its staff bonus by 12% to $3.8 million.
Is HSBC a Good Stock to Buy Now?
Following the results, Jefferies analyst Joseph Dickerson reiterated a Buy rating on HSBA shares with a price target of 980.00p (63.4% upside).
With four Buys, four Holds, and two Sell ratings, HSBA stock has a Hold consensus rating on TipRanks. The HSBC Holdings share price forecast of 1,483.80p implies a whooping 149.9% upside potential from current levels.
