(Alliance News) - HSBC Holdings PLC on Tuesday said annual profit dipped due to expected credit charges and impairments, but said it was considering shareholder returns from the sale of its Canadian banking arm.

In 2022, the Asia-focused lender said net interest income rose to USD32.61 billion from USD26.49 billion a year before.

The figure is ahead of market consensus of USD32.04 billion, and ahead of HSBC's own guidance of USD32 billion.

"A strong net interest income performance reflected higher global interest rates, but there was also good underlying growth across the business in key areas, particularly those linked to our international network," said Chief Executive Officer Noel Quinn.

Net fee income fell to USD11.45 billion from USD13.10 billion. Net insurance premium income rose to USD12.83 billion from USD10.87 billion.

Net operating income - before credit losses and impairment charges - improved to USD51.73 billion from USD49.55 billion. This was slightly ahead of company-compiled consensus of USD51.41 billion.

Total revenue was USD51.73 billion, compared to USD49.55 billion. The bank's net interest margin improved to 1.48% from 1.20%, reflecting increases in interest rates.

Pretax profit fell 7.3% to USD17.53 billion from USD18.91 billion. This was also slightly better than company-compiled market consensus of USD17.49 billion.

"This was due to a net expected credit loss charge of USD3.6 billion compared with a net release of USD900 million last year, as well as the impairment of USD2.4 billion relating to the planned sale of our retail banking operations in France," CEO Quinn explained.

Diluted earnings per share were USD0.74, up from USD0.62 a year before.

At the end of the year, the bank's common equity tier 1 capital ratio was 14.2%, down from 15.8% a year before. It was within its target range of 14% to 14.5%, and up from 13.4% at the end of the third quarter.

Company-compiled consensus had expected it to stand at 13.8% at the end of 2022.

HSBC also updated on the sale of its Canadian banking business to the Royal Bank of Canada. It announced the USD10 billion sale back in November.

As a "priority use" of the sale proceeds, the board will consider a special dividend of USD0.21 per share. However, it will consider this further upon completion of the transaction, which is expected in late 2023. The payment would take place in early 2024, HSBC said.

Any additional surplus capital from the sale would then be put towards organic growth and investment opportunities, as well as potential share buybacks. These would be in addition to existing buyback programmes, it noted.

HSBC's board approved a second interim dividend of USD0.23 per share for 2022, bringing the annual total to USD0.32. This is up from the total of USD0.25 in 2021.

Chair Mark Tucker said the firm would be establishing a dividend payout ratio of 50% to reported earnings per share in 2023 and 2024, excluding "material significant items".

"We aim to restore the dividend to pre-Covid-19 levels as soon as possible. We also intend to return to paying quarterly dividends from the start of 2023," Tucker said.

Looking ahead, HSBC said its revenue outlook "remains positive". It expects net interest income of "at least" USD36 billion in 2023, based on the current consensus outlook for global central bank rates.

It will update the guidance on or before its first quarter results to incorporate the impact of IFRS 17 'Insurance Contracts'.

"Overall, 2022 was another good year for HSBC. We completed the first phase of our transformation and our international connectivity is now underpinned by good, broad-based profit generation around the world," said CEO Quinn.

HSBC shares were down 0.6% at HKD58.40 in Hong Kong on Tuesday, having closed up 0.1% at 621.63 pence in London on Monday.

By Elizabeth Winter, Alliance News senior markets reporter

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