HSBC Results Miss But Trying To Give Comfort Around China Real Estate

HSBC (HSBA LN) released 4Q23 results which missed on revenues, do seem reasonable on credit quality, and only have a USD2bn buyback in here. The equity traded lower in HK earlier, but this seems relatively spread neutral to us.

• Revenues were up 8% y/y but missed consensus marginally (1%) in 4Q23 and that’s only after adding back USD2.7bn of exceptionals (largely related to French business sale). They were 10% lower otherwise. Positively, credit losses fell 28% (10% better than consensus). Even adding back the French loss, pre-tax profit missed estimates.
• Credit metrics: Non-performing loans are flat q/q (at 2.03%) and the credit loss rate was 44bp (2bp better than 3Q23). CET1 is 14.8% (down 10bp from Sep-23) and against a target range of 14-15%. The bank has taken a USD3bn provision against its BoCom investment (3328 HK), reflecting its price fall.
• Outlook: the target is for a “mid-teens” RoTE for FY24 (consensus is around 16-17% now), so perhaps a small downgrade there and mgmt is cautious on loan growth in 1H24. A USD2bn buyback has been announced. CEO sees “bottom… reached” in Chinese real estate and provisioning here was lower than previous quarter.

China and the revenue outlook are set to dominate the call, we feel, which is at 0745, available at https://hsbc.zoom.us/webinar/register/WN_XkdyUWl9T8uW1u4va_QPXw#/ .