By Dhirendra Tripathi
Investing.com – ADRs of HSBC (NYSE: HSBC ) traded 1% lower in premarket Tuesday after its fourth quarter earnings disappointed, hit by a $500 million charge, mostly due to its exposure to Chinese commercial real estate.
The lender’s warning of a weaker performance in its wealth business in Asia overshadowed any boost that could have come from its plan for an additional $1 billion share buyback program. The bank also warned of inflationary pressures, much on the lines of its rival Natwest (NYSE: NWG ) which trimmed its cost-cutting target last week, blaming rising prices for the decision.
The impairment charge -- booked on HSBC’s Hong Kong balance sheets -- was the result of local policy measures that had led to an increase in “refinancing risk and liquidity pressures,” Chief Executive Officer Noel Quinn told Bloomberg. He said those market conditions have improved to some extent.
Fourth quarter profit after tax nearly doubled to $2 billion after the bank released more reserves it had earlier, created to tackle contingencies. With economy and asset quality improving, the bank felt it could do with fewer reserves. However, at 45 cents on a per share basis, it was behind estimates.
Revenue was up 2% at $12 billion as credit and lending activities gained.
The bank said it expects mid-single-digit lending growth over the year while it targets adjusted operating expenses in line with 2021, came in at $8.3 billion.
HSBC is optimistic that, if interest rates harden, it would meet its goal of a double-digit return on equity in 2023, a year sooner than expected.
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