HSBC, Europe's largest bank, has reported a remarkable nearly 80% surge in its pre-tax profit, reaching £24 billion in 2023, driven by elevated interest rates. This growth follows a series of interest rate hikes by central banks worldwide over the past 18 months to counter escalating prices. Meanwhile, competitor NatWest disclosed its highest annual profit since the 2007 financial crisis just last week.
However, HSBC's profits fell short of expectations due to a slowdown in China's economy. Additionally, its earnings were impacted by a significant $3 billion charge related to its stake in China's Bank of Communications. With the bulk of its profits generated in Asia, particularly in China and Hong Kong, HSBC remains closely tied to developments in the region.
HSBC's pre-tax profit for 2022 was $17.1 bn and analysts were expecting it to jump to $34.1 bn last year. But its chief executive, Noel Quinn, said in a statement: "Our record profit performance in 2023 enabled us to reward our shareholders with our highest full-year dividend since 2008."
"They've had quite a sizable increase in what we call net interest margin which is the difference between the amount they charge borrowers and the amount they pay to depositors," banking analyst Frances Coppola said.
"That's really been the principal driver of the increase both in revenues and profits," she added.
"But we have to note that the high interest rate environment is coming to an end."