HSBC announced today (26th) its results for the first quarter of this year. The market expects that pre-tax profit will decline year-on-year, mainly due to the impact of expected credit losses (ECL).
Everbright Sun Hung Kai Wealth Management Strategist Wen Jie believes that Hong Kong business was affected by the epidemic in the first quarter of this year, which limited the development of non-interest income, and the positive factors of interest rate hikes will not be reflected until half a year later.
He estimated that the exchange rate should fluctuate in the range of 50 to 55 yuan, and this performance is not expected to make the stock price fall sharply.
HSBC announced its results for the first quarter of this year today. The comprehensive brokerage estimated that the group's median pre-tax profit in the first quarter was US$3.72 billion, down 35.62% year-on-year.
The main reason is that although the net interest income in the first quarter is expected to record a year-on-year increase of more than 5%, and the net interest margin slightly expands by 3 to 4 basis points, the expected credit loss (ECL) of HSBC in the first quarter is expected to increase. A provision of approximately $934 million was required, compared with a net reversal of $435 million in the same period last year.
The market expects HSBC to raise expected credit losses of about US$934 million in the first quarter, compared with a net reversal of US$435 million in the same period last year.
(Visual China)
Hong Kong's performance in the first quarter dragged down by the epidemic
Wen Jie, a wealth management strategist at Everbright Sun Hung Kai, said the market expected HSBC's pre-tax profit of about $3.7 billion, a forecast he thought was optimistic.
"It is not a big problem to achieve interest income of US$6.9 billion, but the forecast of non-interest income of US$5.8 billion is too optimistic. In the fourth quarter of last year, it was only US$5.3 billion. In the first quarter of this year, Hong Kong's wealth management products did not sell well. If it can be achieved US$5.8 billion, that is, the number of sidelines in the UK is not only good enough to offset that in Hong Kong, but no matter how good it is, I don’t think it is worth it.” He added that there were almost no property sales in Hong Kong in the first quarter of this year, and related borrowings are expected to drop sharply. In addition, many branches were closed, which suppressed the sales of wealth management products and limited the growth of non-interest income.
Wen Jie predicts that HSBC's ECL in the first quarter will be about 800 million to 1 billion US dollars, which is expected to meet with brokers. One is that it is affected by the domestic housing crisis, and the other is that the crisis in Eastern Europe has not been resolved.
Morton believes that although HSBC does not have much business in Russia, it is worried that rising inflation may drag down global macroeconomic growth, especially in the EU region, slowing loan and fee growth, and rising risk costs for banks.
Wen Jie believes that there is no catalyst for the exchange rate, and it is expected to fluctuate in the horizontal range of 50 to 55 yuan.
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The positive factors of interest rate hike will be reflected in half a year as soon as possible
The U.S. Federal Reserve maintains a hawkish signal, with U.S. bond interest rates approaching 3%, and the market is expected to favor the interest income of international banks.
However, Wen Jie worries that the rapid pace of interest rate hikes may not make the U.S. economy smooth.
"The rise in U.S. bond interest rates is not directly linked to the bank's interest rate spread. It is difficult to reflect the positive factors of interest rate hikes in the results in the short term. It will take half a year to see it first."
In terms of stock price trend, the pursuit of dividend-paying stocks in February this year led to the rise of HSBC, which once reached as high as 59.6 yuan. Wen Jie admitted that it rose "too high". Although it has fallen back now, it has outperformed the market, so I don't think there will be a catalyst in the short term. Start a new round of rising waves.
"Because there were 2 billion buybacks to support a stock price before, it should normally fluctuate in the range of 50 to 55 mosquitoes. This performance should not cause the stock price to fluctuate too much!"
HSBC fell with the market yesterday and closed at 51.65 yuan, down 4.6%.
