By
Mayowa Adebajo
March 27th, 2024
The bank is forecasting a $36 billion net income for this current fiscal year.
British multinational universal bank and financial services firm, HSBC Holdings plc (LON: HSBA) has released its performance report for the fourth quarter of last year, unveiling a better-than-expected revenue and profit. According to the banking giant, its profit before tax came in at $5.2 billion.
This profit comes at a 108% growth rate above the $2.5 billion recorded in the year-ago period and better than the $4.97 billion previously projected by the firm. With respect to its full fiscal performance, HSBC said its total revenue came in at $51.73 billion, an uptick from the $49.55 billion recorded in 2021.
Despite the huge revenue, the company’s profit dropped from $18.91 billion in 2021 to $17.53 billion in the past year. According to HSBC, the $5.2 billion profit before tax included a potential $2.4 million it will incur as impairment charges due to the proposed sale of its retail banking business in France.
HSBC like other global banks has benefited from the rising interest rate from Central Banks around the world. The company, however, noted that it recorded positive revenue and profit for the fourth quarter in part due to its own reduced operational expenses. The firm is now optimistic that its profit-generation tactics are working optimally in its key operational jurisdictions.
“We completed the first phase of our transformation and our international connectivity is now underpinned by good, broad-based profit generation around the world,” Noel Quinn, group chief executive said in the release, adding, “We are on track to deliver higher returns in 2023 and have built a platform for further value creation.”
In alignment with its confidence in its business model and revenue retention plans, the bank is forecasting a $36 billion net income for this current fiscal year.
HSBC Returning to Pre-COVID Revenue and Capital Levels
As far as the British bank is concerned, its current performance is taking it back to its pre-COVID-19 revenue. The firm said it will be paying a dividend of 23 cents per share as well as another special dividend of 21 cents per share due by 2024.
The special dividends emanate from the sale of its banking business in Canada, creating a whole new robust avenue to give investors liquidity at a time when the broader financial ecosystem is recovering from inflationary lows.
“The math gets you to an answer of about 50 cents of dividend in 2023, which is sort of pre-Covid levels,” said Quinn. “If we deliver on these promises this year, is that 50 cents is on a payout ratio of 50%.”
Quinn reaffirmed that the firm now has a much healthier balance sheet when compared to its pre-COVID-19 levels. This healthy balance sheet is showcased in its “healthier balance of return generation in yields for our shareholders, plus an ability to retain profits for growth, and if that growth isn’t there, then we have buyback capacity as well,” he said.