We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
HSBC's Q4 Pre-Tax Earnings Up as Revenues Surge, ECL Rises
Read MoreHide Full Article
HSBC Holdings (HSBC - Free Report) reported fourth-quarter 2022 pre-tax profit of $5.2 billion, jumping 95.4% from the prior-year quarter.
Shates of HSBC on NYSE rallied 3% in pre-market trading on solid quarterly performance.
Results reflected a rise in adjusted revenues on higher interest rates and decent loan demand. However, adjusted expenses increased from the year-ago quarter. Further, an increase in expected credit losses and other credit impairment charges (ECL) posed a headwind.
Adjusted Revenues & Expenses Increase
Adjusted total revenues of $15.4 billion surged 38.4% year over year. Reported revenues grew 24.1% to $14.9 billion.
Adjusted operating expenses rose 1.7% to $7.8 billion.
In the quarter under review, ECL was $1.4 billion. This was up substantially from $482 million in the prior-year quarter.
Common equity Tier 1 (CET1) ratio as of Dec 31, 2022, was 14.2%, down from 15.8% recorded as of Dec 31, 2021. Leverage ratio was 5.8%, up from 5.2% at the end of December 2021.
Quarterly Performance by Business Lines
Wealth and Personal Banking: The segment reported $3 billion in pre-tax profit, up significantly from $623 million in the year-ago period. The surge was driven by growth in net interest income and lower expenses.
Commercial Banking: The segment reported a pre-tax profit of $1.9 billion, up 42.2%. Higher revenues supported the rise.
Global Banking and Markets: Pre-tax profit was $686 million, jumping 77.3%. The rise was primarily aided by higher revenues and lower costs.
Corporate Centre: The segment reported a pre-tax loss of $419 million against a pre-tax profit of $293 million in the year-ago quarter.
Outlook
Based on the current market consensus for global central bank rates, the company expects a net interest income of at least $36 billion for 2023.
Adjusted cost growth of 3% is expected in 2023 and includes $300 million of severance costs. HSBC intends to maintain strict cost discipline thereafter.
For 2023, ECL charges are expected to be 40 basis points.
Management expects a return on tangible equity of 12% or more from 2023 onward.
The CET1 ratio is expected to be between 14% and 14.5%.
HSBC expects a dividend payout ratio of 50% for 2023 and 2024. Further, subject to the closure of the sale of its banking business in Canada, the company plans to consider the payment of a special dividend of 21 cents per share.
Our View
HSBC’s strong capital position, initiatives to strengthen digital capabilities, extensive network and efforts to improve operating efficiency through business-restructuring plans are expected to support financials. Exiting from the U.S. and French retail banking operations will help HSBC focus on Asia.
HSBC Holdings plc Price, Consensus and EPS Surprise
Barclays (BCS - Free Report) reported fourth-quarter 2022 net income attributable to ordinary equity holders of £1.04 billion ($1.22 billion), down 4% from the prior-year quarter.
Barclays’ quarterly results were adversely impacted by higher expenses. Also, the company recorded a substantial year-over-year rise in credit impairment charges. On the other hand, an increase in revenues acted as a tailwind.
UBS Group AG (UBS - Free Report) reported fourth-quarter 2022 net profit attributable to shareholders of $1.65 billion, up 22.6% from the prior-year quarter.
UBS Group’s quarterly performance was aided by a decline in expenses. However, lower revenues acted as a headwind. The performances of the Global Wealth Management and the Personal & Corporate Banking divisions were impressive. However, the Asset Management arm and the Investment Bank did not perform well.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
HSBC's Q4 Pre-Tax Earnings Up as Revenues Surge, ECL Rises
HSBC Holdings (HSBC - Free Report) reported fourth-quarter 2022 pre-tax profit of $5.2 billion, jumping 95.4% from the prior-year quarter.
Shates of HSBC on NYSE rallied 3% in pre-market trading on solid quarterly performance.
Results reflected a rise in adjusted revenues on higher interest rates and decent loan demand. However, adjusted expenses increased from the year-ago quarter. Further, an increase in expected credit losses and other credit impairment charges (ECL) posed a headwind.
Adjusted Revenues & Expenses Increase
Adjusted total revenues of $15.4 billion surged 38.4% year over year. Reported revenues grew 24.1% to $14.9 billion.
Adjusted operating expenses rose 1.7% to $7.8 billion.
In the quarter under review, ECL was $1.4 billion. This was up substantially from $482 million in the prior-year quarter.
Common equity Tier 1 (CET1) ratio as of Dec 31, 2022, was 14.2%, down from 15.8% recorded as of Dec 31, 2021. Leverage ratio was 5.8%, up from 5.2% at the end of December 2021.
Quarterly Performance by Business Lines
Wealth and Personal Banking: The segment reported $3 billion in pre-tax profit, up significantly from $623 million in the year-ago period. The surge was driven by growth in net interest income and lower expenses.
Commercial Banking: The segment reported a pre-tax profit of $1.9 billion, up 42.2%. Higher revenues supported the rise.
Global Banking and Markets: Pre-tax profit was $686 million, jumping 77.3%. The rise was primarily aided by higher revenues and lower costs.
Corporate Centre: The segment reported a pre-tax loss of $419 million against a pre-tax profit of $293 million in the year-ago quarter.
Outlook
Based on the current market consensus for global central bank rates, the company expects a net interest income of at least $36 billion for 2023.
Adjusted cost growth of 3% is expected in 2023 and includes $300 million of severance costs. HSBC intends to maintain strict cost discipline thereafter.
For 2023, ECL charges are expected to be 40 basis points.
Management expects a return on tangible equity of 12% or more from 2023 onward.
The CET1 ratio is expected to be between 14% and 14.5%.
HSBC expects a dividend payout ratio of 50% for 2023 and 2024. Further, subject to the closure of the sale of its banking business in Canada, the company plans to consider the payment of a special dividend of 21 cents per share.
Our View
HSBC’s strong capital position, initiatives to strengthen digital capabilities, extensive network and efforts to improve operating efficiency through business-restructuring plans are expected to support financials. Exiting from the U.S. and French retail banking operations will help HSBC focus on Asia.
HSBC Holdings plc Price, Consensus and EPS Surprise
HSBC Holdings plc price-consensus-eps-surprise-chart | HSBC Holdings plc Quote
Currently, HSBC sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Performance of Other Foreign Banks
Barclays (BCS - Free Report) reported fourth-quarter 2022 net income attributable to ordinary equity holders of £1.04 billion ($1.22 billion), down 4% from the prior-year quarter.
Barclays’ quarterly results were adversely impacted by higher expenses. Also, the company recorded a substantial year-over-year rise in credit impairment charges. On the other hand, an increase in revenues acted as a tailwind.
UBS Group AG (UBS - Free Report) reported fourth-quarter 2022 net profit attributable to shareholders of $1.65 billion, up 22.6% from the prior-year quarter.
UBS Group’s quarterly performance was aided by a decline in expenses. However, lower revenues acted as a headwind. The performances of the Global Wealth Management and the Personal & Corporate Banking divisions were impressive. However, the Asset Management arm and the Investment Bank did not perform well.