HSBC, Europe's largest bank, has reported a nearly 80% surge in its pre-tax profit, reaching $30.3 billion (£24 billion) in 2023, driven by high interest rates.
This increase follows a series of interest rate hikes by central banks worldwide over the past 18 months to combat inflationary pressures.
In contrast, rival bank NatWest recently announced its highest annual profit since the 2007 financial crisis.
However, HSBC's profit was lower than anticipated due to a slowdown in China's economy.
The bank's bottom line was further impacted by a substantial $3 billion charge related to its stake in China's Bank of Communications.
HSBC derives the majority of its profits from Asia, particularly China and Hong Kong.
Analysts had expected HSBC's pre-tax profit to reach $34.1 billion in 2023, up from $17.1 billion in 2022.
CEO Noel Quinn attributed the record profit performance to a significant increase in net interest margin, which is the difference between the interest charged to borrowers and the interest paid to depositors.
Despite the strong performance, Quinn cautioned that the era of high interest rates is coming to an end.
In response to the positive financial results, HSBC announced a $2 billion share buyback program, adding to three previous buybacks totaling $7 billion. Additionally, the bank returned $19 billion to shareholders in the previous year.
Investors are closely monitoring HSBC's exposure to China's troubled property sector, which has been in crisis since 2020.
China's economy, the world's second-largest, is experiencing deflationary pressures, discouraging consumer spending.
Last month, a Hong Kong court ordered the liquidation of debt-laden property giant Evergrande.
Moody's economist Harry Murphy Cruise highlighted the challenges facing China's economy and the need for larger economic stimulus measures.
Rival Asia-focused bank Standard Chartered is expected to release its financial results later this week. Photo by Wikimedia commons.
