HSBC promised large payouts in 2023 to appease activist shareholder Ping An after comfortably beating market expectations in the final quarter of 2022.
HSBC’s pretax profit for the final quarter nearly doubled to $5.2bn (4.3bn), beating market expectations of $5bn. This brought the bank’s total profit for 2022 to $17.5bn, seven per cent lower than last year but in line with market expectations.
Revenue also beat expectations, rising 24 per cent to $14.9bn, as higher interest rates around the world boosted the bank’s net interest income.
HSBC set aside $1.4bn in impairments in the fourth quarter, including charges related to exposure in the Chinese real estate sector as well as the UK.
The bank approved a second dividend of $0.23 per share, bringing the total for 2022 to $0.32 per share. It said the proceeds from the sale of its Canadian business would be used to pay a special dividend of $0.21 per share.
Going into 2023, HSBC said it would consider bringing buybacks forward to the first quarter results in May and revert to quaying quarterly dividends.
CEO Noel Quinn said “we are on track to deliver higher returns in 2023 and have built a platform for further value creation. With the delivery of higher returns, we will have increased distribution capacity, and we will also consider a special dividend once the sale of HSBC Canada is completed.”
HSBC has been reassessing its position in a number of markets around the world since 2020, when it announced a “pivot to Asia”. This strategy was turbocharged by a campaign from shareholder Ping An to spin out HSBC’s Asian business, which generates most of the group’s profits.
In 2022 it completed the sale of its US mass market retail business, announced the planned exit from French retail market and the planned sale of its banking business in Canada.
Ping An’s campaign was given impetus by UK financial regulators stopping banks from handing out shareholder returns during the Covid-19 crisis, effectively starving HSBC’s Asian investors. The large payout announced today may be designed to appease disgruntled shareholders.
A large group of Hong Kong retail investors with stakes in HSBC have supported Ping An’s campaign. Breaking up HSBC could unlock value to reimburse shareholders, the insurer has argued.
HSBC’s Asia-focused rival Standard Chartered reported results last week, failing to meet market expectations on earnings but making up for it with a larger than expected buyback scheme.