HSBC posts record annual profit but misses estimates on China write-down, shares tumble 7%

HSBC‘s full-year 2023 pretax profit missed analysts’ estimates on Wednesday, hit by impairment costs linked to the lender’s stake in a Chinese bank, sinking its London-listed shares as much as 7%.

Europe’s largest bank by assets saw its pre-tax profit climb about 78% to a record $30.3 billion in 2023 from a year ago, according to its statement released Wednesday during the mid-day trading break in Hong Kong. That missed median estimates of $34.06 billion from analysts tracked by LSEG.

Chief Executive Noel Quinn also announced an additional share buyback of up to $2 billion to be completed ahead of the bank’s next quarterly earnings report. HSBC also said it would consider offering a special dividend of 21 cents per share in the first half of 2024 after it completes the sale of its Canada business.

With the highest full-year dividend per share since 2008 and three share buy-backs in 2023 totaling $7 billion, Quinn said the bank returned $19 billion to shareholders last year.

Quinn’s remuneration doubled to $10.6 million in 2023 from $5.6 million the year before, boosted in part by variable long-term incentives since his appointment in 2020.

HSBC suffered a “valuation adjustment” of $3 billion on its 19% stake in China’s Bank of Communications, Quinn said. In an interview with CNBC following the earnings release, he said this is “a technical accounting adjustment” and “not a reflection” on BoComm.

This write-down was among the items that plunged the bank’s fourth-quarter pretax profit by 80% to $1 billion from a year earlier.

HSBC’s Hong Kong shares reversed gains of about 1% after trading resumed, falling as much as 5%. The benchmark Hang Seng Index was up about 2%. Shares in London were down around 7% in early deals, set for their biggest one-day drop since 2020, according to Reuters.