HSBC 1Q24: Consensus Beat But HK NPL Spike, Weak for STAN, HK Peers

HSBC 1Q24 results (HSBC: A3/A-/A+) are marginally ahead of consensus but include a jump in HK corporate non-performers (weak lateral for StanChart and HK peers) and a USD3bn buyback, which appears ahead of expectations. There’s nothing here to push spreads tighter, in our view.

• Key credit stats: CET1 is broadly as expected and up 40bp from Dec-23 (at 15.2%). Loan losses are significantly better than expected and down from the run-rate seen across 2H24 (now at 31bp). Non-performers are up quite meaningfully (+10% since Dec-23) and well ahead of expectations (17% > consensus). The growth is mostly in corporate in the HK legal entity – this is barely mentioned in the slides and likely to be questioned, we feel.
• Wider group: revenues are 3% ahead of consensus (+3% y/y, too) with NII a small positive, costs overran expectations (by 4%) and that lower loan loss charge then helped the 2-5% bottom line beats.
• Outlook: guidance remains unchanged which implies further loan loss weakening (to 40bp for FY24) and only appears a very minor overall upgrade potential. CEO Noel Quinn is retiring after nearly 5yrs in post.

Conf call is 0745 (London time) at: https://hsbc.zoom.us/webinar/register/WN_TE30I5JzQkS_1LWNmS57sg#/registration