HSBC reported a 95 per cent surge in its fourth-quarter profit before tax as rising interest rates around the globe boosted the net interest income of Europe’s biggest lender, putting it on course to achieve better returns next year.
Pre-tax income for the three months to the end of December climbed by $2.5 billion to $5.2 billion in the reporting period.
Adjusted profit before tax rose by 92 per cent to $6.8 billion, HSBC said on Tuesday.
The quarterly income beat the $4.96 billion average estimate of analysts compiled by the bank as net interest income jumped more than 41 per cent on an annual basis to $9.58 billion.
The bank had $1.4 billion impairments in the fourth quarter, close to triple the $500 million it reported in the same quarter last year.
The charge includes HSBC's exposures in mainland China's commercial property sector, as well as corporate exposures in the UK.
Reported revenue jumped 24 per cent on an annual basis to $14.9 billion, driven by strong growth in interest income and an increase in revenue from the lender’s markets and securities services businesses.
“2022 was another good year for HSBC. We completed the first phase of our transformation and our international connectivity is now underpinned by good, broad-based profit generation around the world,” said group chief executive Noel Quinn.
“This contributed to a strong overall financial performance. We are on track to deliver higher returns in 2023 and have built a platform for further value creation.”
The bank plans to pay a special dividend of $0.21 per share from the proceeds of $10 billion sale of its Canada business, once the deal is completed, Mr Quinn said.
The rise in borrowing costs has benefitted lenders globally as central banks seek to tame surging inflation.
The US Federal Reserve is expected to continue increasing its benchmark rates, although at a softer pace, as it aims to bring inflation from 40-year highs last year to its target range of 2 per cent.
However, despite a rise in its interest income, HSBC said its profit for the 12-month period to the end of December fell by $1.4 billion to $17.5 billion, dragged down by impairments worth $2.4 billion on the planned sale of its retail banking operations in France.
The bank’s reported revenue increased by 4 per cent annually to $51.7 billion, driven by interest income and higher revenue from its global foreign exchange operations.
HSBC's reported expected credit losses and other credit impairment charges were $3.6 billion, including allowances to reflect “increased economic uncertainty, inflation, rising interest rates and supply chain risks, as well as the ongoing developments in mainland China‘s commercial real estate sector”.
Looking forward, the lender said its growth and transformation programmes, and higher global interest rates, “give us confidence in achieving our return on average tangible equity target of at least 12 per cent for 2023 onwards”.
The bank’s revenue outlook remains positive for 2023 and it expects a net interest income of at least $36 billion this year.
