Will rate rises bolster HSBC, Standard Chartered outlooks as coronavirus hits Hong Kong’s economy?

Name: Hong Kong's Covid-19 isolation beds 90% full as city records more than 2,000 new cases
Uploaded: 2022-02-16T06:00:19.000Z
Duration: 2 min 18 s
Description: Hong Kong's Covid-19 isolation beds 90% full as city records more than 2,000 new cases

Standard Chartered, HSBC expected to report full-year results beginning this week as investors anticipate further central bank tightening

Hong Kong, the biggest market for both banks, has seen its economy crimped by efforts to control coronavirus spread

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A temporary testing center for Covid-19 at the Central district in Hong Kong on Monday, February 7, 2022. Photo: AP

Chad Bray

Published: 2:00pm, 16 Feb 2022

Investors will be closely watching the forward guidance by HSBC and Standard Chartered as the lenders prepare to report their annual results this week against the backdrop of a tightening rate environment and a weaker economic outlook for Hong Kong, their single biggest market.

Shares of the lenders have traded near two-year highs in recent weeks as central banks, including the US Federal Reserve, try to keep a lid on surging inflation in a number of major Western economies.

Standard Chartered will be the first of the city’s three currency-issuing banks to update investors on its full-year performance on Thursday, followed by HSBC on February 22 and Bank of China (Hong Kong) next month.

“Standard Chartered aims to deliver a 5 to 7 per cent revenue CAGR [compound annual growth rate] in the medium term on the back of strong loan growth, new structural hedge programme, treasury optimisation and the emergence of [its virtual bank] Mox,” Citi analyst Andrew Coombs said in a research note. “We forecast revenues to grow by a larger 9 per cent year-on-year in financial year 2022, due to higher net interest income on the assumption of four rate hikes by the Fed in 2022 (note Citi economists are even more hawkish, assuming five hikes).”

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Hong Kong's Covid-19 isolation beds 90% full as city records more than 2,000 new cases

In the fourth quarter, Standard Chartered is expected to report a pre-tax profit of US$288 million, according to a consensus compiled by the bank. In the same quarter in 2020, the bank incurred a pre-tax loss of US$449 million, driven in part by restructuring charges and credit impairments for potentially soured loans.

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