HSBC, Standard Chartered may post bumper 2024 profits this week, helped by wealth demand
HSBC and Standard Chartered Bank are expected to post bumper profits this week when they kick off the reporting season among Hong Kong’s banks, as demand for wealth management buttressed their income against thinning interest-rate margins.
HSBC may report a 7 per cent increase in its 2024 profit to US$24.09 billion when it reports its full-year results on Wednesday,, according to Bloomberg’s consensus analyst estimates. This is the first set of full-year results with Georges Elhedery at the helm as HSBC’s CEO.
Standard Chartered’s 2024 profit may jump 22 per cent to US$4.23 billion, according to forecasts. The bank reports on Friday .
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“Standard Chartered’s operating performance last year was broadly similar to HSBC”, said Kenny Ng Lai-yin, a strategist at Everbright Securities International in Hong Kong. “Standard Chartered outperformed HSBC in net interest income, recording year-on-year growth in revenue during the first three quarters of last year. This gave Standard Chartered a stronger growth momentum compared to HSBC.”
HSBC’s Group Chief Executive Georges Elhedery during the Global Financial Leaders’ Investment Summit at the Grand Hyatt hotel in Wan Chai on 19 November 2024. Photo: Dickson Lee alt=HSBC’s Group Chief Executive Georges Elhedery during the Global Financial Leaders’ Investment Summit at the Grand Hyatt hotel in Wan Chai on 19 November 2024. Photo: Dickson Lee>
Standard Chartered’s 2024 pre-tax profit may have grown by 18 per cent, while HSBC’s pre-tax income may have increased by 5 per cent, Ng said.
Both banks are expected to buy back their shares from the market, maintaining last year’s budget when HSBC spent US$2 billion, while Standard Chartered poured US$1 billion into buy-backs, analysts said.
The aggregated pre-tax profit among the city’s 30 retail banks increased by 8.4 per cent in the first nine months of 2024, slower than the 62 per cent jump in 2023 and 18.7 per cent in 2022, according to the Hong Kong Monetary Authority (HKMA).
“Profitability remained good among the banks”, the HKMA’s Deputy Chief Executive Arthur Yuen Kwok-hang said in January, noting that the city’s banks must “focus more on bad debt issues and the increasing trend of financial scams this year”.
HSBC’s growth pace slowed last year, compared with the 56 per cent jump in 2023 when the bank reaped the benefits of a fat interest rate margin during the post-pandemic surge in loans and demand for wealth-management products.
“The strongest growth driver [of HSBC’s 2024 results] comes from non-interest income, reflecting a favourable investment market that has boosted the wealth and personal banking and global banking and markets,” said Ng, who recommends investors buy the stock. “On the other hand, net interest income has been under pressure, which has partially offset the growth contributed by non-interest income.”
All eyes are on Elhedery to see if he announces on Wednesday any more moves to cut costs. He has reorganised the top echelons of the 160-year-old bank since taking over last September from Noel Quinn, moves that prompted JPMorgan to raise its estimate of HSBC’s 2025 per-share earnings by 5 per cent.
“The recent movements in the forward yield curve and potential cost savings from HSBC’s reorganisation provide upside risk to our total return estimates,” JPMorgan said in a November 18 research note. “On the other hand, asset quality risk from Hong Kong commercial real estate (4 per cent of loans) and increase in tariffs is manageable.”
Hong Kong’s banks are facing thinner margins, as the HKMA cut its base rate three times since September in lockstep with the US Federal Reserve. HSBC and Standard Chartered have followed by slashing their prime rates by a combined 0.625 percentage points.
“HSBC is expected to report strong growth in its non-interest income”, said KGI Asia’s head of investment strategy Kenny Wen. “The higher-for-longer US Fed rates last year will benefit interest income, [while] the restructuring of its businesses is expected to create synergistic effects and reduce expenses.”
HSBC and Standard Chartered are headquartered in London, but earn most of their profits in Asia and count Hong Kong as their single biggest market. The results of the two currency issuing banks reflect how interest-rate cuts and a weaker economy are affecting Hong Kong’s lenders.
KGI’s Wen expected Standard Chartered to report growth in its fourth quarter, with its pre-tax profit possibly reaching US$1.3 billion, but the bank may face challenges of slower loan growth and narrower interest margin due to the rate cut.
