HSBC nearly doubles CEO’s pay despite fall in fourth-quarter profits | HSBC

HSBC has nearly doubled the pay packet of its chief executive, Noel Quinn, despite a drop in fourth-quarter profits, which took an unexpected hit from its exposure to China’s real estate downturn.

The London-headquartered lender disclosed on Wednesday that it had settled on a £10.6m package for Quinn, marking a significant rise from the £5.6m he received for 2022, thanks to a long-term bonus in HSBC shares worth more than $5m.

The bank also increased its overall bonus pool for staff by 12% to $3.8m.

It came amid a surprise drop in fourth-quarter profits, which fell to $1bn from $5bn a year earlier, due primarily to a $3bn charge linked to the lender’s stake in the Bank of Communications in China, where lenders are struggling with a downturn in the country’s real estate market.

That was despite Quinn having suggested last quarter that China had experienced the worst of the crisis.

“I did say last quarter that I thought the market had bottomed. I still believe that,” he told a press briefing on Wednesday morning. “I also said last quarter that it will take a few years for the market to work its way through the current challenges. So I didn’t say challenges were over.

“But I did believe the activity levels in the commercial real estate market, the valuations in the commercial real estate market in mainland China had bottomed, and that what I saw was a progressive and gradual recovery in the market.”

The news sent HSBC shares down 7% on Wednesday morning, making it the worst performer on the FTSE 100. It has put HSBC on track for its biggest daily drop since the early days of the pandemic in April 2020, when lenders were forced to cancel their dividends by the UK regulator amid fears over a surge in defaults linked to Covid lockdowns.

That was despite a 78% rise in annual pre-tax profits, with HSBC having benefited from rising interest rates in both the west and Asia – where it makes the bulk of its earnings – allowing it to charge its customers more for loans and mortgages. HSBC’s profits were also flattered by its emergency rescue of Silicon Valley Bank UK during the mini-banking crisis in March 2023.

Overall, profits rose to $30.3bn, up from $17.1bn a year earlier and a record high. However, that missed analyst estimates of $34bn.

The bank is preparing to pay shareholders another dividend worth 31 cents a share, taking its total payout for the year to 61 cents. It also is planning a share buyback that will hand up to $2bn to investors.

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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, three share buybacks last year totalling $7bn, and a further share buyback of up to $2bn. This reflected four years of hard work and the strength of our balance sheet in a higher interest rate environment.”

But profits may have peaked, given the likely easing of interest rates, paired with further pain from China’s real estate market.

Richard Hunter, the head of markets at Interactive Investor, said: “The likely reduction of interest rates globally could remove a plank from a core growth area of late, while the rather messy performance in the fourth quarter could potentially lead to some rather more negative momentum.

“Indeed, in the group’s own outlook, HSBC is forecasting slow growth for the first half of the year, followed by a gradual recovery, while inevitably the parlous state of the Chinese economy in general and the real estate sector in particular are ominous headwinds.”

Read More:HSBC nearly doubles CEO’s pay despite fall in fourth-quarter profits | HSBC

2024-02-21 07:26:00

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