HSBC net profit rises, structured notes balance up 32.4%

Reported net profit at HSBC continued to increase in 2022, reaching US$16.7 billion including a US$2.2 billion credit arising from the recognition of a deferred tax asset – the bank’s profit was up 13.6% year-on-year (YoY), according to the bank's 2022 annual report.

Reported revenue grew four percent to US$51.7 billion, driven by ‘strong growth in net interest income, with increases in all of [its] global businesses, and higher revenue from global foreign exchange in global banking and markets,’ the report shows.

There was a good performance across our global businesses - Noel Quinn, HSBC

In the meantime, reported operating expenses dropped four percent to US$33.3bn, reflecting ‘the favourable impact of foreign currency translation differences of US$2.2bn and ongoing cost discipline, which were in part offset by higher restructuring and other related costs, increased investment in technology and inflation’.

The UK bank posted structured notes measured at fair value of US$10.4 billion, 32.4% higher from a year ago. By underlying, equities contributed US$6.8 billion, or 65.4% of the total, while FX accounted for US$2.7 billion.  

As part of the liabilities, the wholesale funding cash flows payable by HSBC included US$20.5 billion unsecured senior structured notes as of the end of 2022, of which 29.3% are due in over five years, translating to a decrease from US$21.9 billion a year ago.

Since 2015, HSBC has rolled out more than US$2 billion of self-issued green bonds and structured green bonds with the capital invested into a variety of green projects, including: green buildings, renewable energy and clean transportation projects, according to the bank.

‘In 2022, we are internally reviewing and enhancing the green bond framework, with further refinement to be undertaken in 2023,’ stated the bank. 

In 2022, HSBC further lifted its investment in technology, which made up 20% of its overall adjusted operating expenses, or US$6.1 billion, an increase from US$5.6 billion in 2021.

The UK bank hired Vivek Kumar from Standard Chartered Bank for a newly-created role - global head of FX and derivatives platforms & product management – in February 2023 as it seeks to ‘modernise and introduce new digital technologies’ to its FX, derivatives and structured products management globally.

Asia has remained the focus for the wealth and personal banking business at HSBC, led by CEO Noel Quinn (pictured), since it first announced the relocation of its structured product manufacturing hub to Hong Kong SAR in early 2020.

There were net new invested assets US$80 billion generated at the UK bank in 2022, of which US$59 billion were in Asia.

SRP database registers a total of 4,484 equity-linked investments (ELIs) issued by HSBC in Hong Kong SAR in 2022 following a noticeable scaledown in Q4 22. The issuer additionally marketed 5,372 dual currency structured deposits, 1,802 listed callable bull/bear contracts (CBBCs) and 468 listed derivative warrants (DWs) in the Asian city during the year.

In China, the UK bank issued and distributed 67 structured deposits in Q4 22, which lead to a total issuance of 371 for the full year, a decline from 438 in 2021. The ChinaAMC CSI 300 Index ETF (HKD) was the most favoured pick by being linked to 133 of the bank’s issuance, at a safe distance from Tencent Holdings and the Morningstar Exponential Technologies ESG Screened Target Volatility 7% Index, which were tied to 38 and 28 structured deposits, respectively.

The range of ESG index-linked product was introduced in China in November 2022 as part of HSBC's broader campaign in Asia.

In Taiwan, 1,120 structured notes featuring snowball payoffs were issued by HSBC in 2022, a decrease from 1,1718 in 2021. With the majority sold in-house, the products were also distributed by Cathay Securities Investment Trust (148), KGI (74), BNP Paribas (52), Fubon Securities (45), UBS (31), Bank Sinopac (29) and Far Eastern International Securities (11).

The distributor list reflects a widened variety of partners for the UK bank in Taiwan. Prior to HSBC’s launch only BNP Paribas (102 products), UBS (88) and Far Eastern International Securities (three) were active in the market in 2021.   

In the US, HSBC was ranked the ninth largest issuer of retail structured notes on the back of US$4.2 billion sales volume collected from 1,170 products following a rebound in Q2 22. This translates to a 4.5% market share and represents a growth from 2021 when the UK bank marketed 906 retail structured notes worth US$3.2 billion.

Segments

‘There was a good performance across our global businesses,’ said Quinn.

In commercial banking, adjusted profit before tax at HSBC rose 24% to US$7.7 billion ‘driven by revenue increases across all products and in all regions, most notably Asia and the UK’, according to the bank.

Global banking and markets delivered adjusted profit before tax of US$5.4 billion, up eight percent compared with 2021. Global payments solutions was the main driver, with 119% growth in net interest income from higher interest rates, and a strong performance in global foreign exchange.

In wealth and personal banking, adjusted profit before tax of US$8.5 billion was 27% higher than 2021. Net interest income growth drove a good performance in personal banking, while there was also balance sheet growth in the UK, Asia outside Hong Kong SAR and Mexico.

Click here to view the annual report of HSBC Holdings Plc.