HSBC’s results are a real mixed bag, but that is commonplace with most banks these days. In a nutshell, commercial banking is doing well, and its returns target might be achieved a year ahead of plan.
However, there are some headwinds in its core territory of Asia including uncertainty around China’s property market, and the share buyback scheme has only been extended by up to $1 billion, much less than some analysts had expected.
Banks in general are more optimistic about their earnings outlook thanks to rising interest rates in various parts of the world. Higher rates give them more of a chance to increase their net interest margins, the difference between what they earn on loans and pay out on savings deposits.
“The rising rate situation is not a clear-cut golden goose for HSBC. Its strategy is focused on carving out a bigger position in Asia, and China recently bucked the trend by cutting its interest rates. Fears there could be more pain in the Chinese property sector also clouds its outlook,” said AJ Bell’s Russ Mould.
“Furthermore, inflation around the world is causing problems for consumers and businesses – which are its end markets.
“A focus on wealth management in Asia might spare it some of the pain, as rich clients may not be too affected by inflationary pressures. But the bank guides for a weaker wealth performance in the first quarter of 2022, so like most of its peers HSBC is having to do a lot of juggling to find pockets of strength across its business.”