HSBC posts record high profit, misses estimate as China write-off bites

HONG KONG/LONDON, Feb 21 (Reuters) - HSBC Holdings reported a record annual profit, that nonetheless came in below analysts' forecasts as the income boost from higher interests rates was offset by a hefty $3 billion charge from its stake in a Chinese bank.

HSBC, which has market value of $160 billion, reported on Wednesday a pretax profit of $30.3 billion for 2023, up 78% increase from $17.5 billion a year earlier.

The results were worse than the $34.1 billion mean average estimate of brokers compiled by HSBC.

The British lender rewarded investors with a fresh $2 billion share buyback, and said it would consider a special dividend of $0.21 per share in the first half of 2024 once its Canada disposal is complete.

However, the record-high annual profit was marred by a $3 billion impairment on the bank's stake in China's Bank of Communications.

The writedown in the lender's BoCom stake came after a review of the Chinese bank's likely future cash flows and outlook for loan growth and interest margins, HSBC said, amid China's shakier-than-expected economic recovery.

The large write-off came after rival Standard Chartered in October took a nearly $1 billion hit on its own China bank stake, as widening loan losses compress lenders' profits.

"China's recovery after reopening (following the pandemic) was bumpier than expected, but its economy grew in line with its annual target of around 5% in 2023," Chairman Mark Tucker said in a release.

The biggest European lender said it remains cautious for the loan growth outlook in the first half of 2024, against a slowing economic growth in many economies where inflation persisted.

HSBC said its bonus pool rose to $3.8 billion from $3.4 billion the year prior, reflecting improved performance, and it would also launch a new variable pay scheme for junior and middle management staff.

The London-headquartered bank announced a fourth interim dividend of $0.31 per share, resulting in a total for 2023 of $0.61 per share. (Reporting by Selena Li in Hong Kong and Lawrence White in London; Editing by Himani Sarkar)