📈 HSBC’s Profits Plummeted By 80% in Q4!

🐺 Hi pack-mates,

This is Howling Markets,  the newsletter that rightfully remunerates your time investment in the amazing world of finance!

Today we will be covering:

• Education: How is Directors’ Remuneration Determined? 💰

• MetaMask Introduces Security Alerts To its Crypto Wallets 🛡️

• HSBC’s Profits Plummeted By 80% in Q4! 📈

• Equity and Debt Markets Daily Update ⚖️

• And more!

Market Watch 👀

How Is Directors’ Remuneration Determined?

Well, you might think that because CEOs are technically employees of their company, their salary should be decided by their employment contract. But, who would write the employment contract of the chief executive in the case of public companies?

Additionally, there is also another main issue regarding the directors’ remuneration: their influence over the entire company. Because the directors have control over the business and other employees, they might be tempted to set their salary to whichever amount they like and very few people would be able to contest it.

Because of this, by law, public companies must establish a remuneration committee composed of independent directors to determine which is the adequate annual total paycheck of the executives.

Additionally, in the US the shareholders have a “say on pay” right, meaning that when the total paycheck established by the remuneration committee is presented at the shareholder meeting, they have the right to vote on it and express their opinion.

However, the “say on pay” rule expresses that the shareholders’ vote on directors’ compensation is only advisory and not binding, meaning that the directors should use it as guidance, but they are not obliged to comply with it.

MetaMask Introduces Security Allers To its Crypto Wallets

Cyberattacks are an unfortunately well-known issue of cryptocurrencies and crypto wallets. Just a couple of months ago we had seen how Ledger had been targeted by a group of hackers who had managed to initiate a token draining process directly from the accounts of thousands of users.

To solve this cybersecurity issue, MetaMask has decided to partner with Blockaid, a Web3 security startup created to help developers protect their users from hacking, phishing, and frauds.

Despite being recently founded in 2022, Blockaid has already managed to achieve impressive results by protecting over $7.1 billion in assets and avoiding more than $500 million in losses by having scanned more than 1.3 million transactions.

The efficacy of Blockade is twofold. First, they can run real time full-coverage simulations, meaning that they can simulate offchain signatures as well as onchain transactions, preventing any malicious attacks. Secondly, they are also able to validate transactions by scanning and analyzing large amounts of data, discovering a wide range of attacks on any type of token.

Because of this, MetaMask started collaborating with Blockaid in October and now they are finally ready to launch an “experimental” version provided as default for all their users’ account. Do you believe that this is a great step forward for the world of cryptos?

Today’s Howling Question

And now, it is time for our howling question!

Despite the turbulent Q4, HSBC had a 78% increase in pre-tax income between 2022 and 2023. How do you think its share price changed in 2023?

a) -5%

b) +5%

c) +20%

d) +30%

e) +45%

Try to answer the question by yourself, and then check the correct answer after the last interesting news!

HSBC’s Profits Plummeted By 80% in Q4!

The disastrous Chinese economic situation continues to wreak havoc all around the world and this time around was HSBC to end up in the eye of the storm.

HSBC, originally named The Hong Kong and Shanghai Banking Corporation, is one of the largest deposit-taking and financial services institutions in the world. It was originally founded over 150 years ago in British Hong Kong, but a little over 30 years ago its headquarters were moved to London, UK.

Despite its European headquarters, the ties to the Asiatic economies remained relatively strong, especially towards Chinese commercial real estate sector due to the CEO’s vision of a blooming Chinese economy over the next years.

However, after Wednesday’s release of the company’s Q4 performance, it became clear that the Chinese economy dragged down, and almost erased, an entire quarter’s worth of profits!

During the last quarter, HSBC fell victim to a $3 billion writedown on the value of a Chinese bank and other commercial real estate properties, together with many other billion-dollar losses all around the world including a $2 billion writedown on the sale of their French division, a $500 million hyperinflation charge for their Argentinian division and a $300 million loss on their unsecured lending operations in Mexico.

However, despite these losses, the CEO’s total pay package increased from £5.6 million to £10.6 million, reaching 169 times the average HSBC employee’s salary.

As a consequence, all these factors contributed to a fall in pre-tax Q4 profits from $5 billion to $1 billion, bringing in the total 2023 pre-tax profits to $30 billion. Despite this annual figure being 78% higher than 2022’s pre-tax profits, it was $4 billion lower than what analysts expected.

Because of this, HSBC’s share price plummeted overnight by -8.23% and concluded the day down -8.89%.

Equity and Debt Markets Update

And now, our daily markets update!

On Wednesday the stock market opened with a significant gap down, around -0.5%, and then it continued to fall throughout the initial portion of the day. However, during the final hours of the trading session the price picked back up and it managed to close the day at +0.13%.

On the other hand, the bond market has remained relatively stable. The 10 year US government bond yield hovered above the 4.2% level, which has been testing since last Wednesday, and closed the trading session by gaining +0.93%.

Answer

The correct answer is d) +30%.

Last year was a great investing enviroment for HSBC’s shareholders as the stock price climbed by 30.1% during 2023 thanks to a powerful rally during the first half of the year. 

However, it is important to notice that the price has now retraced almost a third of this 2023 gains and that it is still far off its $99.52 all-time high set right before the great financial crisis at the end of 2007.

Howl-Worthy Memes 😂

🐺 See you next time!

Enjoy reading this newsletter? Forward it to a friend.

Was this newsletter forwarded to you? Sign up here.

Want to get your product or job listing for business-related readers? Please email us.