What's next for the banking giant?
HSBC Holdings CEO Noel Quinn recently convened his top executives at a retreat in southeast England, painting an optimistic picture of the company’s performance during the past year amidst rising interest rates. According to a Bloomberg report, with the bank’s profits primarily driven by Asian markets, Quinn exuded confidence at the late-year gathering in Windsor, hinting at his long-term vision for the institution.
However, Quinn cautioned his team about forthcoming challenges, foreseeing tougher times ahead due to various factors including uncertainties in China and Hong Kong, and the potential exacerbation of US-China tensions.
Mark Williams, a finance expert from Boston University, warned that HSBC’s heavy reliance on China could pose significant earnings risks in the near future. “A bank can only be as strong or weak as their customers and the economy in which they operate,” Williams noted.
According to the report, analysts project HSBC’s net revenue to surge by 27% to $65.5 billion for 2023 compared to 2022, with net interest income reaching $37.4 billion. Analysts at UBS Group shares the bank is anticipated to announce $2 billion in share buybacks, building upon last year’s $7 billion repurchase plan.
Additionally, investors await updates on the sale of HSBC’s Canadian arm and the possibility of a special dividend later this year, per a note to clients on February 12. The Canadian government approved Royal Bank of Canada’s (RBC’s) $10 billion deal to acquire the bank’s Canadian operations in December.
Focus on China under the spotlight
HSBC’s exposure to the Chinese real estate market is under scrutiny, especially in light of China Evergrande Group’s impending liquidation, marking a substantial blow to the country’s property sector. While HSBC has tempered its involvement in Chinese real estate, investors seek clarity on its potential ramifications.
The ongoing property crisis in China has cast a shadow over the country’s economic outlook, although some analysts, like Nicolas Moreau of HSBC Asset Management, have expressed optimism about a rebound once the real estate turmoil settles.
Speaking at the Asia Financial Forum in Hong Kong last month, Moreau described China as an “area where we should see growth coming back as the real estate crisis is going through its motion.”
However, Bloomberg notes the pace and effectiveness of the Chinese government’s response to stimulate the economy remain pivotal for any potential recovery. Investors and analysts alike closely monitor HSBC’s moves in response to evolving market dynamics, particularly in China. HSBC is scheduled to announce its earnings on February 21.
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