On a Wednesday in February, during the midday pause in Hong Kong trading, HSBC, the London-headquartered giant that is Europe's largest bank by assets, laid out a 2023 that looked strong on its surface and disappointing beneath it. Pre-tax profit of $30.3 billion, up roughly four-fifths from the year before, fell short of what analysts had anticipated, and the bank traced the gap to a $3 billion valuation write-down on its stake in the Chinese lender Bank of Communications. It is a reminder that a global institution's fortunes can be tethered to a single distant holding, and that the story of
HSBC Profit Misses Estimates on $3 Billion Chinese Stake Hit, Though Bank Unveils $2 Billion Buyback
A profit up nearly four-fifths, and the shares still moved lower.
Mark
So the profit rose 78% and the stock still fell. Why?
Mimi
Because the market was expecting more. Analysts' median was $34.06 billion, and HSBC reported $30.3 billion.
Mark
And the gap is largely that $3 billion charge?
Mimi
The bank's own explanation is a $3 billion valuation adjustment on its stake in Bank of Communications. Quinn named it directly.
Luke
Worth noting the $3 billion is roughly the size of the gap between estimate and result, but the reporting doesn't say analysts hadn't modeled any of it. We only know the miss and the charge, not how they connect line by line.
Mark
What did the bank offer to offset it?
Mimi
An extra buyback of up to $2 billion and the highest full-year dividend per share since 2008. Across 2023, three buybacks totaling $7 billion, and $19 billion returned overall.
Luke
Careful with that $19 billion. It comes from Quinn, and the report doesn't break it down beyond the $7 billion in buybacks. The remainder presumably is dividends, but that isn't spelled out.
Mark
And the market reaction?
Mimi
Shares reversed a roughly 1% gain and fell as much as 3.2%, while the Hang Seng rose nearly 3%.
Luke
That's one afternoon's move. It tells us how investors reacted at that moment, not whether they view the charge as lasting. And the source doesn't say why the Chinese stake lost value, so that remains unknown.
Le Pouls
- Shares that had been climbing about 1% reversed sharply, sliding as much as 3.2% in Hong Kong just as the market reopened.
- A $3 billion valuation adjustment on the Bank of Communications stake dragged reported profit well below the $34.06 billion analyst median.
- Chief Executive Noel Quinn is steering the response by pairing the miss with an extra buyback of up to $2 billion and the highest full-year dividend per share since 2008.
- Total shareholder returns reached $19 billion for the year, yet the stock's fall shows investors still weighing the write-down against the headline gains.
On a Wednesday in February, during the midday pause in Hong Kong trading, HSBC, the London-headquartered giant that is Europe's largest bank by assets, laid out a 2023 that looked strong on its surface and disappointing beneath it. Pre-tax profit of $30.3 billion, up roughly four-fifths from the year before, fell short of what analysts had anticipated, and the bank traced the gap to a $3 billion valuation write-down on its stake in the Chinese lender Bank of Communications. It is a reminder that a global institution's fortunes can be tethered to a single distant holding, and that the story of a year is often told as much by what was lost on the margins as by what was gained at the center.
HSBC's shares gave up an early gain on Wednesday and slid as much as 3.2% in Hong Kong after the bank released full-year results during the midday break. The benchmark Hang Seng Index was rising nearly 3% at the time, which made the reversal in HSBC's stock stand out all the more.
The bank, Europe's largest by assets and headquartered in London, reported 2023 pre-tax profit of $30.3 billion, up about 78% on the year before. Yet analysts tracked by LSEG had expected $34.06 billion, and the gap was large enough to dominate the reaction. Chief Executive Noel Quinn pointed to a $3 billion valuation adjustment on the bank's stake in Bank of Communications, a Chinese lender, as the cause of the shortfall.
Quinn paired the disappointment with a gesture to shareholders. HSBC will run an additional buyback of up to $2 billion and declared its highest full-year dividend per share since 2008. Across 2023, three buybacks totaled $7 billion, and with dividends the bank returned $19 billion in all.
The day's trading captured the tension of the report: a near four-fifths rise in profit, a bigger payout and a fresh buyback, set against a share price that moved lower. The Bank of Communications write-down is the item to watch, and how the stock trades in the coming sessions will show whether investors see it as a one-off or a sign of something larger.
HSBC's shares gave up an early gain on Wednesday and slid as much as 3.2% in Hong Kong after the bank reported full-year results that came in below what analysts had expected. The numbers were released during the midday trading break, and when the market reopened, the stock, which had been up about 1%, reversed course. The benchmark Hang Seng Index, by contrast, was up nearly 3% at the time.
The headline figure was a large one. HSBC, Europe's largest bank by assets and headquartered in London, reported pre-tax profit of $30.3 billion for 2023, an increase of about 78% from the year before. But the median estimate from analysts tracked by LSEG was $34.06 billion, so the result fell short by a wide margin.
The bank pointed to a specific cause. Chief Executive Noel Quinn said HSBC took a "valuation adjustment" of $3 billion on its stake in Bank of Communications, a Chinese lender. The charge was an impairment cost tied to that holding, and it was the factor behind the miss.
Alongside the earnings shortfall, Quinn announced capital returns meant to cushion the news. HSBC will carry out an additional share buyback of up to $2 billion. It also declared the highest full-year dividend per share the bank has paid since 2008.
The scale of what HSBC handed back to investors last year was considerable. The bank ran three share buybacks during 2023, together worth $7 billion. Counting dividends and those repurchases, Quinn said, HSBC returned $19 billion to shareholders over the year.
The day's trading showed the tension in the report. A profit rise of nearly four-fifths, a bigger payout and a fresh buyback were all on offer, yet the share price moved lower, as investors weighed the shortfall against estimates and the write-down on the Chinese stake.
The $3 billion adjustment on Bank of Communications is the item to watch, as it ties HSBC's reported earnings to the value of a holding in a Chinese bank. How the shares trade in the sessions after the results, and how the new $2 billion buyback is carried out, will show whether investors treat the charge as a one-off or as a sign of something larger.
Citations marquantes
The bank took a $3 billion valuation adjustment on its stake in Bank of Communications.— Noel Quinn, HSBC Chief Executive
HSBC returned $19 billion to shareholders in 2023, including three buybacks totaling $7 billion.— Noel Quinn, HSBC Chief Executive
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