By Sherry Qin and Ben Otto


HSBC Holdings' quarterly earnings were hurt by billions of dollars in impairments related to its investment in a Chinese bank, but higher full-year earnings prompted the lender to unveil up to $2 billion in fresh share buybacks.

The Asia-focused lender said Wednesday that it swung to a net loss of $153 million in the fourth quarter from a profit of $4.38 billion in the same period a year earlier, while pre-tax profit fell 81% on year to $977 million. The bottom line was hurt by a $3.0 billion charge taken as the bank adjusted its valuation of its stake in Shanghai-based Bank of Communications, an investment that dates back to 2004.

Net interest income in the quarter slipped to $8.28 billion from $8.99 billion a year ago, missing a consensus estimate of $9.03 billion from Visible Alpha.

A steep rise in full-year earnings, buoyed by higher interest rates, however, prompted the London-headquartered bank to announce fresh share buybacks of up to $2.0 billion. The bank's 2023 pretax profit jumped 78% to $30.35 billion, while net profit rose 56% to $22.43 billion.

Shares were 3.1% lower in Hong Kong afternoon trade, after being as much as 1.3% higher before the results were released.

HSBC, Europe's largest bank by market value, also announced a fourth interim dividend of $0.31 a share, resulting in a total payout of $0.61 a share for 2023, and said its dividend target payout ratio will remain at 50% for 2024.

"Our record profit performance in 2023 enabled us to reward our shareholders with our highest full-year dividend since 2008, three share buy-backs last year totaling $7 [billion], and a further share buy-back of up to" $2 billion, Group Chief Executive Noel Quinn said.

Amid macroeconomic challenges and expected rate cuts in 2024, HSBC expects to post banking net interest income of at least $41 billion in 2024. It added that its outlook for loan growth this year "remain cautious," but that it expects customer lending to post mid-single digit growth over the medium-to-long term.

Banking analysts have long awaited a revaluation of HSBC's 19% stake in BoCom, one of China's largest state-controlled banks. HSBC has said the stake is strategically important for its ambitions to grow in Asia, even after many other Western banking giants exited similar positions.

Over the years, however, a gulf opened up between HSBC's valuation of its shareholding and the lower value implied by BoCom's stock price. Last August, HSBC put its internal valuation at $23.9 billion, or about $14.5 billion above the level suggested by the shares.

HSBC said Wednesday that its adjustment has no material impact on its capital, capital ratio and distribution capacity, "and therefore no impact on our share buy-backs or dividends."

"We remain confident in the resilience of the Chinese economy, and the growth opportunities in mainland China over the medium to long term," it said.


Write to Sherry Qin at sherry.qin@wsj.com


(END) Dow Jones Newswires

02-21-24 0118ET