HSBC announced on Monday that it would begin paying dividends to shareholders after first-half profits more than doubled as an ongoing reorganization and shift to Asia paid off.
The earnings exceeded expert expectations and provide a boost to the Asia-reliant lender after a difficult 2020 in which its profits were battered by the coronavirus and mounting geopolitical concerns.
Profit before tax increased by $6.5 billion to $10.8 billion, while profit after tax jumped by $5.3 billion to $8.4 billion.
In addition, for the first half of the year, the bank declared an interim dividend of seven cents per ordinary share.
Last year, when the coronavirus ravaged the global economy, British regulators forced banks to stop payouts in order to shore up liquidity.
However, they relaxed such “temporary guardrail” measures last month.
HSBC is one of the largest dividend payers in European banking, and after a year of limitations, it is anticipated to set aside more than any of its competitors this year and next, according to Bloomberg Intelligence projections.
“We definitely feel more confidence,” Ewen Stevenson, chief financial officer, told Bloomberg. “We will keep buybacks and dividends under review,” he continued.
HSBC shares rose 2.3 percent in Hong Kong shortly after the results were announced.
HSBC, like many banking behemoths, was hit hard by the coronavirus last year, with a 30% drop in 2020 earnings.
Under CEO Noel Quinn, it has embarked on a significant restructuring, announcing plans to reduce its workforce by approximately 35,000 people in order to reduce costs and focused on its most profitable regions, Asia and the Middle East.
The results represent a boost for Asia-focused HSBC and outperform analyst expectations.
The results represent a boost for Asia-focused HSBC and outperform analyst expectations. Photographer: AFP/MARCO BERTORELLO
HSBC earns 90 percent of its profits in Asia, with China and Hong Kong being the key growth engines.
In February, it released a new strategy outlining ambitions to redouble its efforts to capture a larger share of the Asian market.
Weighed down by low interest rates, it intends to pursue more fee-based income, particularly wealth management for Asia’s growing affluent.
Earlier this year, the bank divested 90 of its US branches and concluded a long-running sale of its ailing French retail division.
“We are focused on implementing the growth and transformation initiatives we unveiled in February,” Quinn added, stressing that the global bank’s all geographical segments are currently profitable.
HSBC’s results were cautiously positive for the future, but the ongoing coronavirus pandemic weighed on the global economy.
Borrowing was on the rise, with the bank forecasting mid-single-digit lending growth for the year, while credit losses were “anticipated to be considerably lower than our medium-term range.”
“Uncertainty persists as countries emerge from the epidemic at varying rates, government support measures unwind, and new virus strains put vaccination programs to the test,” the bank warned.
While it was not mentioned in the reports released on Monday, HSBC has an additional wrinkle: geopolitical tensions.
HSBC’s past and current ties to China are both a source of strength and a source of peril.
It has been more vulnerable than most global banks to the increasingly strained relationship between China and Western nations, particularly after Beijing implemented severe security measures on Hong Kong last year.
HSBC supported the security measure, which drew criticism from lawmakers in the United Kingdom and the United States, and has suspended the accounts of several Hong Kong democracy advocates at the request of local officials.
At the same time, the lender has been chastised by Chinese state media for supplying information that led to the arrest of a key Huawei official in Canada.
According to HSBC, it is required to follow the laws of each jurisdiction in which it operates.