HSBC 2022 earnings preview: Where next for the HSBC share price?

Canary Wharf London cityscape at night with HSBC building
Josh Warner
By :  ,  Market Analyst

When will HSBC report 2022 earnings?

HSBC is scheduled to release annual earnings for 2022 on Tuesday February 21.

 

HSBC 2022 earnings consensus

HSBC is forecast to report a 6% rise in adjusted revenue to $53.1 billion. Analysts are looking for a 7.5% fall in adjusted pretax profit to $20.3 billion, with the reported figure at the bottom-line expected to fall 7.7% to $17.5 billion.

 

HSBC 2022 earnings preview

HSBC will see its topline benefit from higher interest rates, but earnings dragged lower by provisions in 2022.

Its net interest margin is forecast to average 1.5% in 2022, up from 1.2% the year before, which should bolster net interest income by 21% to $31.9 billion. This will be countered by lower non-interest income, driven by lower fees as appetite for fundraising, dealmaking and listings remains subdued in the current environment.

While the topline grows, earnings have suffered in 2022 because they will be dragged down by some $3.1 billion worth of provisions put aside for potentially bad loans as banks remain uncertain about the economic outlook. That will make a substantial dent considering it released reserves and boosted profits by over $900 million in 2021. Commentary on the outlook for 2023 will be key here considering markets believe provisions will soar another 35% to $4.3 billion in 2023. China’s reopening may allow some reversals to be made here, but markets believe the cost of risk will be higher than what HSBC has guided for now.

On a brighter note, HSBC has impressed the markets with its cost control efforts this year. In fact, operating expenses should be over 3.5% lower in 2022 at $33.4 billion compared to the year before. Investors will hope HSBC can find more savings after identifying more wiggle room in the last quarter. Currently, markets believe expenses can fall another 5.8% in 2023, suggesting expectations are high.

This should lead to HSBC enjoying a better year in 2023 as far as markets are concerned. While provisions continue to linger over the bank, easier comparatives, faster revenue growth and more disciplined cost controls are forecast to see profits leap to record levels. Consensus figures suggest adjusted pretax profit can pop 36% in 2023 to $27.6 billion.

Its CET1 ratio – which measures a bank’s solvency – should come in around 14.1% in 2022 and could rise to 14.7% in 2023.

This will be the first earnings update from new chief financial officer Georges Elhedery since he took over at the start of 2023. We should also learn the impact of its recent agreement to sell its banking business in Canada to the Royal Bank of Canada for $10.1 billion, with the focus on how much of this will be returned through either a special dividend or a share buyback.

Notably, Standard Chartered, which is the other London-listed bank geared toward Asia, has gained ground since it reported annual results this week that showed 2022 profits fell just short of expectations, but this still came in at their highest level in nine years and was overshadowed by the bank’s decision to accelerate its goal of achieving a return on tangible equity of 10% in 2023 from its previous deadline of 2024. Meanwhile, their more UK-focused rivals have failed to impress the markets this week with Barclays and NatWest both having lost severe ground after releasing earnings.

 

Where next for the HSBC share price?

The HSBC share price has rallied over 17% since the start of 2023 and is currently trading at its highest level in over three years. The 20 brokers that cover HSBC see further upside potential from here considering the average target price is sat at over 680p, which was last seen back in 2018.

However, we can see a bearish divergence from the RSI recently, with the indicator falling whilst the share price has risen over the past month and still flirting with overbought territory. That suggests it could become increasingly more difficult to find higher ground going forward and that the risks are geared toward the downside.

We could see some support emerge at 585p should we see a reversal before the 2022-high of 567.2p comes back into play.

Is the HSBC share price about to experience a reversal?

 

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