HSBC trimmed its China commercial real estate exposure by $4.6 billion, while that in US was cut by 27 per cent. Image Credit: Bloomberg

London: HSBC Holdings plc reported fourth-quarter profit fell 80 per cent after taking unexpected charges on holdings in a Chinese bank and from selling its French retail operations.

Pre-tax profit fell to $1 billion in the final three months of last year from $5.05 billion in the year-earlier period, the London-headquartered bank said in a statement. The lender took a $3 billion charge on its holding in Bank of Communications Co. and $2 billion on its French sale.

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While rising interest rates globally boosted HSBC’s full-year earnings to a record, the bank has faced headwinds over the past year in China, one of its key growth markets. The ongoing real estate meltdown has not only hurt the world’s second-largest economy, but has forced HSBC to set aside money to cover potential losses, including $200 million in the quarter.

At the same time, HSBC announced a $2 billion share buyback and a fourth quarter interim dividend of 31 cents a share. CEO Noel Quinn warned the macro environment remains “challenging” and the outlook remains uncertain amid geopolitical volatility in Europe and the Middle East.

Asia pivot

HSBC is several years into a strategy of pivoting its business increasingly toward the faster-growing markets of Asia where the bank makes most of its money. Disposals of businesses in France and Canada have been balanced by acquisitions of insurance and wealth management assets in Asia, a region with swelling ranks of the wealthy.

HSBC, which gets the bulk of its profit from Asia, initially paid $1.75 billion for a 19.9 per cent stake in Shanghai based BoCom in August 2004.

“BoCom remains a strong partner in China, and we remain focused on maximising the mutual value of our partnership,” HSBC said in the statement. “Our positive views on the medium- and long-term structural growth opportunities in mainland China are unchanged.”

Overall HSBC cut its exposure to China commercial real estate to $12.1 billion, down by $4.6 billion from 2022. Its US exposure was cut by 27 per cent to $3.9 billion.

Further acquisitions are on the cards. Quinn said last year that if he saw the opportunity to grow the business through more bolt-on deals, he would do it. But he also cautioned against the idea that the bank would engage in major acquisitions.

Geopolitical tensions remain an issue for the bank given its position as a financial bridge between the West and China.