HSBC (HSBA.L) reported pre-tax profits of $5.2bn (£4.33bn) for the final three months of last year, boosted by rising interest rates around the world.
The London-listed bank’s profits rose more than 90% compared to the same period a year earlier.
However, the group’s reported profit before tax fell by $1.4bn to $17.5bn compared to the year previous due to the sale of its retail banking operations in France. HSBC is also in the process of selling its business in Canada.
Europe’s largest bank by assets, HSBC said its fourth-quarter results reflect strong reported revenue growth and lower reported operating expenses.
"2022 was another good year for HSBC," chief executive Noel Quinn said. "We are on track to deliver higher returns in 2023."
Banks have seen strong net interest income as central banks around the world raised rates to tackle inflation. HSBC said it expects net interest income of at least $36bn in 2023, up from $26bn in 2021.
HSBC also announced a dividend bonanza, as it plans to pay a special dividend of $0.21 per share, as a “priority use of the proceeds” from the $10bn sale of its Canada business, as well as more regular payouts and a fresh share buyback.
"With the delivery of higher returns, we will have increased distribution capacity, and we will also consider a special dividend once the sale of HSBC Canada is completed," Quinn said in a statement.
The deal with the Royal Bank of Canada (RY.TO) is expected to be completed this year.
HSBC's asset disposals have picked up pace in the last year as it faces pressure from its biggest shareholder, Ping An (2318.HK). The Chinese insurance group has urged the bank to split off its Asian business to boost returns, a move against which HSBC has pushed back.
HSBC has also been reducing its headcount in recent years to help cut costs and CEO Quinn hinted at more job cuts ahead.
"There will be no easing off at all on costs," he said. "We are now considering up to $300m of additional costs for severance in 2023," he added.
The bank reported $3.6bn in expected credit losses and other impairments for the year, citing “increased economic uncertainty from inflation, rising interest rates and supply chain risks”.
Joshua Warner, market analyst at City Index, said: Earnings beat expectations and the improved outlook for shareholder returns should win favour with investors. The ordinary dividend was raised 28% from the year before and hit its highest level in four years and HSBC is considering making a one-off special payout once the $10bn sale of its operations in Canada is complete. Plus, it will resume making quarterly dividend payments in 2023 with a 50% payout ratio and new share buybacks could be on the way earlier this year than what markets had anticipated.
"Higher returns should help allay some of the pressure from investors as the bank refocuses on Asia. The bank has faced calls from shareholder Ping An, which owns around 8% of HSBC, for the bank to spin-off its Asian operations rather than double down on the region since last year.
"Meanwhile, HSBC continued to put more money aside to its reserves and book large levels of credit losses and impairments thanks to its exposure to China’s commercial real estate market and the potential for more loans to turn sour given the uncertain economic outlook. Plus, while costs fell in 2022 despite the inflationary environment, markets will be disappointed that HSBC expects adjusted expenses to grow around 3% in 2023 considering they believed they could decline further this year."
Fran Boait, executive director at Positive Money, commented: “It should come as no surprise that a bank with a track record of financing all things detrimental to the climate, nature and human rights is happy to reap the rewards of interest rate rises that have burdened families already struggling with the cost of living.
“These profits are the chiefly result of higher interest rates paid by the public, rather than any increased efficiency or better service to customers.
“Rather than imposing more costs on ordinary households, the government should tax the windfall profits of banks in order to lift households out of fuel poverty and end the dependence on food banks that has come to mark so many families’ daily experience.”