HSBC Holdings Plc and Standard Chartered Plc may spell out the risks brought on by their China property operations and a Federal Reserve pivot when they report earnings.
Standard Chartered is set to post a jump in adjusted pretax profit for the quarter, though it faces challenges ahead. The lender is considering restructuring its institutional banking unit to improve returns, a move that may include job cuts. That’s as it’s been forced to set aside more reserves for souring loans linked to Chinese commercial property in recent years.
HSBC’s Chief Executive Officer Noel Quinn also warned top executives of further headwinds, as troubles in its key markets of China and Hong Kong point to major challenges.
Loan charges might loom larger than consensus estimates for HSBC and its peers because of rising mortgage risks and residual bad debts from China’s commercial property, according to Bloomberg Intelligence analysts Francis Chan and Nicholas Ng.
Any comments on how lenders are preparing for a shift in federal interest rates will be of interest, as it may cast a shadow over the margins of major banks. UOB may see lower net interest margin sensitivity from a Fed pivot, Citi said.
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Asia airlines saw a boom in air travel last year and momentum is expected to continue in 2024, helping carriers like Singapore Airlines C6L Ltd. Australia’s Qantas Airways Ltd. will report right after an inquiry accused it of price gouging, dealing another blow to its reputation.
Highlights to look out for:
Tuesday: Singapore Airlines (SIA SP) probably benefited from passenger-yield strength that may hold up into the summer and possibly through 2024, driving the share price higher, according to Citi. It may be pressured by higher fuel costs amid tensions in the Middle East, having only hedged against a small portion of its expected fuel needs in 2024, BI said.
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- BHP’s earnings will be overshadowed by the announcement of a US$2.5 billion ($3.37 billion) impairment charge on the value of its nickel assets as prices of the metal plummeted in recent months. It also almost doubled the provision set aside to cover damages from the 2015 Samarco dam failure to US$6.5 billion.
Wednesday: HSBC may see its net interest income sustained by rising Hibor rates in the quarter, BI said, adding that further share buybacks are supported by strong capital. Investors will focus on its sensitivity to monetary easing by the Federal Reserve this year, and particularly on the outlook for Hong Kong’s net interest margin. Its net interest margin is expected to reach 1.69% in 2023 and 1.62% in 2024, up from 1.48% in 2022, based on estimates compiled by the bank. The lender earlier concluded its US$3 billion share buyback programme.
- Rio Tinto’s annual underlying profit probably fell as the world’s top iron ore producer faced weaker prices for the commodity in 2023.
Thursday: UOB should post higher full-year net income, as elevated interest rates boost net interest income and revenue. The bank’s funding costs may remain under pressure by rising fixed deposits, BI said. Total fixed deposits in Singapore rose 15.2% to $890 billion in December.
- Qantas’ first-half adjusted net income may decline around 25%, estimates show, despite stronger post-pandemic demand for international travel. Watch for management comments on a raft of scandals ranging from allegations it overcharged customers and that it sold tickets on flights that were already canceled.
- Lenovo’s third-quarter sales probably edged about 0.61% higher, consensus shows, helped by a recovery in PC sales and resilient services growth. Its intelligent devices group sales likely grew for the first time in seven quarters, aided by normalized PC and smartphone inventories and recovering consumer sentiment, BI said. The services business may have reached double-digit growth, supported by demand for customized solutions for corporate clients.
Friday: Standard Chartered’s adjusted pretax income probably jumped 89% in the fourth quarter, while its net interest margin rose 10 basis points to 1.68%, consensus shows. The focus will be weakening revenue prospects and persistent China risks, BI said. Potential plans to separate the investment bank from its corporate and commercial banking operations will dominate the narrative.
