Latest news with #BoCom
Yahoo
29-04-2025
- Business
- Yahoo
HSBC Braces for $1.6 Billion Hit in China Shakeup -- But Investors Are Getting a $3 Billion Surprise
HSBC Holdings (NYSE:HSBC) is staring down a potential pretax loss of up to $1.6 billion after China's Finance Ministry announced a $69 billion recapitalization for four major state-owned banks, including Bank of Communications (BoCom). Following the capital injection, HSBC's stake in BoCom is expected to dilute from 19% to 16%, though CFO Pam Kaur emphasized it won't touch the bank's capital ratios. Despite the near-term accounting hit, management stressed that the move strengthens BoCom's CET1 ratio, positioning it to compete harder in a market still battling real estate woes and escalating US-China tensions. Warning! GuruFocus has detected 2 Warning Sign with HSBC. China's property sector slump and rising trade pressures continue to drag on the broader financial system, prompting Beijing to shore up its banking giants. BoCom posted a slim 0.9% profit growth last year, mainly driven by reduced credit impairment charges, even as net interest margins stayed under pressure. HSBC's CEO Georges Elhedery voiced support for the recapitalization, calling it a strategic positive that bolsters BoCom's ability to grow a critical move as asset quality risks across the Chinese banking sector remain stubbornly high. Meanwhile, HSBC dropped stronger-than-expected Q1 numbers and rolled out a fresh $3 billion share buyback, aiming to steady investor nerves in a shaky market. Management also flagged that even under a scenario of sharply higher global tariffs, the direct hit to revenue would likely stay in the low single digits, with about $500 million in potential credit losses. Last year, HSBC already absorbed a $3 billion impairment tied to its original $1.75 billion investment in BoCom, underscoring the complex but enduring ties between Europe's biggest trade bank and China's evolving financial battlefield. This article first appeared on GuruFocus.
Arabian Post
29-04-2025
- Business
- Arabian Post
HSBC Endures $1.6 Billion Hit Amid BoCom Stake Reduction
HSBC Holdings Plc has disclosed an anticipated pre-tax loss of up to $1.6 billion following the dilution of its stake in China's Bank of Communications . This development arises from BoCom's private share placement, part of a broader initiative by Chinese state-owned banks to bolster their capital reserves. The dilution reduces HSBC's holding in BoCom from 19.03% to approximately 16%, a consequence of the Chinese government's strategy to strengthen its banking sector. The $71.5 billion recapitalization effort aims to enhance the capacity of major state-owned banks, including BoCom, to support the national economy. Despite the substantial charge, HSBC has indicated that the loss will not significantly impact its capital ratios or dividend distributions. The bank emphasized that the investment in BoCom is long-term, and the charge is a non-cash accounting adjustment due to the dilution. This is not the first time HSBC has faced financial repercussions related to its BoCom investment. In the previous year, the bank reported a $3 billion impairment on its stake, citing challenges in China's financial sector, particularly the ongoing property market crisis. The latest charge coincides with HSBC's announcement of a 25% decline in first-quarter pre-tax profits, amounting to $9.5 billion. This downturn is attributed to one-time losses from business disposals in Canada and Argentina. Nevertheless, the results surpassed analyst expectations, which had projected profits of $7.8 billion. In response to the profit decline, HSBC has initiated a $3 billion share buyback and declared a first-quarter dividend of $0.10 per share. The bank's CEO, Georges Elhedery, who assumed the role in September, is spearheading a cost-cutting initiative targeting $1.5 billion in annual savings by 2026. This strategy includes restructuring business segments and divesting operations in Germany, South Africa, France, and Malta. See also Aramco and BYD Join Forces on Energy Vehicle Innovation HSBC has also raised its bad loan provisions by $202 million to $876 million in the first quarter, reflecting economic uncertainty and the impact of higher tariffs. Of this amount, $100 million is allocated for exposure to Hong Kong's commercial property sector. The bank anticipates lending demand to remain subdued throughout the year and projects a potential $500 million increase in loan loss provisions if global economic conditions deteriorate further.
Reuters
21-03-2025
- Business
- Reuters
China's Bank of Communications 2024 profit flat, warns of margin pressure
People visit the Bank of Communications' booth at the 2021 China International Fair for Trade in Services (CIFTIS) in Beijing, China September 3, 2021. REUTERS/Florence Lo/File Photo Purchase Licensing Rights, opens new tab Summary Companies BoCom's annual profit flat BoCom VP warns of margin pressure, bad loan risks NPL ratio end-Dec flat from end-Sept BEIJING/SHANGHAI, March 21 (Reuters) - China's Bank of Communications Co Ltd (BoCom) ( opens new tab, reported a 0.9% rise in 2024 net profit, while warning of margin pressure and bad debt. Profit was 93.586 billion yuan ($12.91 billion) last year，according to a filing on Friday. Get a look at the day ahead in U.S. and global markets with the Morning Bid U.S. newsletter. Sign up here. "Net interest margins will continue to face pressure in the short term," BoCom vice president Zhou Wanfu told a press conference following the publication of the annual results. "On the asset side, factors like LPR (benchmark lending rate) cuts, adjustments to existing mortgage rates and other policy factors, combined with weak effective credit demand, have intensified industry competition," Zhou added. His remarks come as Chinese banks have grappled with weak loan demand amid a slowing economy and a protracted property crisis, which policymakers have responded to by lowering borrowing costs. BoCom is the first of the nation's five major state-owned banks to report annual results for 2024. Also of concern for the bank is the real estate business, which will continue to drag. Vice president Gu Bin said that there will be increasing bad debt among loans to property developers, while risks on retail loans have also risen. "In 2025, the external environment will be more complicated, challenging and uncertain," the bank said in the filing. The bank's net interest margin (NIM) - a key gauge of profitability - was 1.27% at the end of last year, slightly narrowed from 1.28% at the end of September. Its non-performing loan (NPL) ratio was 1.31% at the end of last year compared to 1.32% at end of September. ($1 = 7.2497 Chinese yuan renminbi) Reporting by Ziyi Tang and Engen Tham; Editing by Muralikumar Anantharaman and Kim Coghill Our Standards: The Thomson Reuters Trust Principles., opens new tab
