More than £10 billion was erased from the value of HSBC on the London stock market on Wednesday after the bank took a $3 billion hit on a stake it owns in a Chinese lender.
Shares in the FTSE 100 bank fell 54p, or 8.4 per cent, to 589¾p, its biggest one-day fall since the onset of the Covid crisis in 2020, after HSBC revealed an impairment on its investment in Bank of Communications in its annual results.
The charge dragged on what were record profits for HSBC last year. While its pre-tax profits jumped by 78 per cent year-on-year to an all-time high of $30.3 billion, they missed analyst forecasts of $34.1 billion as a result of the impairment. The impact of hyperinflation in Argentina, where HSBC also operates, dealt another blow to the bank’s performance in the final quarter.
The stock market rout was a setback for Noel Quinn, the HSBC chief executive who has run the Asia-focused business since 2019. He has driven a turnaround of the lender, partly by expanding its presence in mainland China, and successfully fought off an attempt by an activist investor to force HSBC to split in two.
Yet investors are increasingly worried about the outlook for the Chinese economy. These concerns have been stoked by a crisis in the country’s huge commercial property sector.
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HSBC said it had taken the impairment on its Bank of Communications stake following a reassessment of its value “in line with recent market developments in mainland China”.
Quinn sought to reassure investors that the move “doesn’t have an impact on our capital” and would not affect HSBC’s ability to return surplus capital to shareholders.
In another sign of the uncertainty facing HSBC in China, it also topped up provisions to cover possible loan losses from Chinese commercial property by $200 million in the fourth quarter, taking the overall charge last year for its exposure to the troubled sector to $1 billion.
