Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

HSBC faces crunch time for China-linked credit losses

Published 16/02/2024, 14:41
Updated 16/02/2024, 14:41
© Reuters.  HSBC faces crunch time for China-linked credit losses

Proactive Investors - HSBC Holdings PLC (LON:HSBA)’s exposure to the beleaguered Chinese property market will be under the microscope when the bank posts its annual results on Wednesday, 21 February.

Most of HSBC’s revenues come from Asia.

This puts the bank’s Hong Kong wing in murky waters considering its concurrent exposure China’s ongoing property crisis and margins could face a squeeze if China-linked bad debts begin piling up.

HSBC sought to allay concerns over its China exposure in the third quarter, stating that “we continue to monitor risks related to our exposures in mainland China’s commercial real estate sector closely”.

But with $800 million in expected credit losses attributed to Chinese property racked up in the nine months to 30 October 2023, anxieties are justified.

Firm-wide, HSBC typically allows for credit losses between 0.3% to 0.4% of average gross loans. If this figure comes in hot, the bank could face heightened scrutiny from the market.

Full-year net interest income (NII) is expected to be above $35 billion, but shareholders will be eager to hear HSBC’s outlook for the year ahead, given the likelihood of lower central bank interest rates coming.

UBS analysts noted that, “given the reset in US rate expectations, and HSBC's gearing to those rates, we expect a key focus on results day on the outlook for NII embedded in income guidance (if any)”.

“We think the outlook for NII, where we are 7% below consensus in 2025, merits closer examination by the market,” IUBS analysts added.

HSBC’s internal guidance has the CET1 ratio “within our medium-term target range of 14% to 14.5%, and we aim to manage this range down in the long term”.

On the dividend front, the payout ratio is expected to continue along the 50% path heading into 2024.

Read more on Proactive Investors UK

Disclaimer

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.