HSBC reveals record profits but takes hit from links to China

HSBC has unveiled record-high yearly profits and nearly doubled the pay packet for its boss, but has seen its share price drop after revealing its finances took a hit in recent months because of its ties to China’s struggling property market.

The bank said its pre-tax profit surged by nearly 80% to top 30.3 billion US dollars (£24 billion) in 2023, from 17.1 billion dollars (£13.6 billion) the year prior.

The jump was helped by higher interest rates which have pushed up the cost of borrowing, driving bigger earnings for the UK’s largest lenders.

The bank also revealed in its annual report that the pay package for chief executive Noel Quinn nearly doubled last year.

He took home £10.6 million, up from £5.6 million in 2022, primarily thanks to a £5 million long-term bonus in HSBC shares that he gained during the year.

Bankers for HSBC also shared bonuses worth 3.8 billion US dollars (£3 billion), surging by 12% compared with the previous year.

But HSBC revealed that its earnings were knocked in recent months because of problems facing China, the world’s second-largest economy.

The majority of the bank’s profits are generated in Asia, although its global headquarters are in London.

UK banks annual profits
HSBC reported record profits for 2023 (Anthony Devlin/PA)

Its pre-tax profit plunged by 4.1 billion US dollars (£3.3 billion) to one billion US dollars (£800 million) in the final three months of the year, compared with the same period the year before.

The fall was driven by a three billion-US dollar (£2.4 billion) hit linked to HSBC’s stake in Bank of Communications, a Chinese bank.

Lenders in China have faced a sharp downturn in the country’s commercial real estate market, which has left many developers with mounting debts.

Shares in HSBC tumbled by about 7% on Wednesday morning following the surprise fourth-quarter hit.

But Mr Quinn said the bank remains “confident on the economy in China” and the fact that leaders are working to stimulate the economy

“I did say last quarter, I thought the market had bottomed. I still believe that,” he told reporters on Wednesday.

“I also said last quarter that it would take a few years for the market to work its way through the current challenges – so I didn’t say the challenges were over.”

He said there has been a “progressive and gradual recovery” in the real estate market.

Meanwhile, Mr Quinn said his pay package was based on the bank’s performance.

“As you can see from the numbers, 2023 was a very strong performance, and that is reflected in my own personal renumeration,” he said.