UK Registers Record Budget Surplus In January, HSBC Fourth-Quarter Profit Plunges

Bridgette Randall
21 Feb, 2024
Frankfurt

European markets traded mixed as investors awaited the release of the latest policy meeting minutes from the European Central Bank and the Federal Reserve. 

Benchmark indexes in Paris and Frankfurt advanced but eased in London. 

Banks were in focus after HSBC reported a less-than-expected increase in its annual earnings in 2023 and Fresenius Medical Care reported flat fiscal revenue. 

In Asia, market indexes closed higher after China-controlled funds stepped up intervention and bought Chinese stocks to stabilize financial markets, a day after the People's Bank of China lowered its 5-year loan prime rate by 25 basis points, the largest rate cut since the loan was introduced in 2019.

In overnight trading, benchmark indexes in the U.S. declined ahead of the release of the Federal Reserve's policy meeting minutes later today. 

Moreover, tech stocks were under pressure ahead of the release of quarterly earnings from Nvidia later in the day. 

 

UK Registers Surplus In January 

The UK government registered a budget surplus in January, the largest on record for the month since record-keeping began in 1993, said the Office for National Statistics. 

Central government revenue increased £3.9 billion to £111.4 billion, while expenditure increased £1.6 billion to £102.6 billion.

The budget balance usually logs surpluses in January because of self-assessed tax receipts in the month. 

Public sector net borrowing, excluding public sector banks, swung to a surplus of £16.7 billion in January, higher than the £9.2 billion surplus in the month a year ago. 

In the ten-month period of the current fiscal year, UK government borrowing was £96.6 billion, £3.1 billion less than in the corresponding period a year ago. 

UK public sector net debt at the end of January was provisionally estimated at 96.5% of gross domestic product. 

 

Europe Indexes and Yields

The DAX index increased by 0.2% to 17,110.15, the CAC-40 index rose 0.2% to 7,812.65, and the FTSE 100 index inched lower by 0.9% to 7,651.08.

The yield on 10-year German bonds edged up to 2.39%; French bonds inched higher to 2.87%; the UK gilts edged higher to 4.07%; and Italian bonds inched higher to 3.87%.

The euro edged higher to $1.08, the British pound inched higher to $1.261, and the U.S. dollar gained to 88.07 Swiss cents.

Brent crude decreased $0.22 to $82.09 a barrel, and the Dutch TTF natural gas declined by €0.46 to €23.71 per MWh.

 

Europe Stock Movers

HSBC Holdings declined 7.6% to 594.40 pence, despite the UK-based and China-focused global bank reporting a sharp jump in profit and announcing a stock buyback program. 

The bank reported a 56% surge in its annual profit in 2023 to $22.43 billion from $14.83 billion, and income per share increased to $1.15 from 72 cents a year ago, respectively. 

Revenue in 2023 rose 30% to $66.1 billion, driven by a $5.4 billion increase in net interest income and a $10.0 billion increase in non-interest income. 

Net interest margin increased by 24 basis points to 1.66%, and expected credit losses and other impairment charges were $3.4 billion. 

The bank announced a new $2 billion stock repurchase plan and hiked its full-year dividend to 61 U.S. cents from 32 U.S. cents a year ago. 

Revenue in the fourth quarter declined 11% to $13 billion after the company reclassified its retail operation in France as "held of sale" and after-tax profit dropped by $4 billion to $0.2 billion. 

The bank took an impairment charge of $3.0 billion related to its associate Shanghai, China based BoCom.