HSBC doubles profits, hints at share buybacks as bad debt fears subside By Reuters

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© Reuters. FILE PHOTO: The HSBC logo is seen in the Canary Wharf financial district in London, Britain March 3, 2016. REUTERS / Reinhard Krause / File Photo

By Alun John and Lawrence White

HONG KONG / LONDON (Reuters) – HSBC Holdings beat forecast on Monday with first-half pre-tax profit more than doubling from last year when it set aside $ 7 billion to cover debts questionable related to the pandemic.

Encouraged by an economic rebound in its two largest markets, Hong Kong and Britain, HSBC has reinstated dividend payments, reported higher payments going forward and released $ 700 million that had been set aside as provisions. He also said share buybacks were being considered as an option after ruling them out earlier this year.

Like its rivals, Europe’s largest bank is benefiting from better-than-expected resilience from businesses grappling with the COVID-19 pandemic. That said, a drop in income has underscored longer-term challenges.

HSBC said pre-tax profit of $ 10.8 billion, higher than the $ 4.32 billion in the same period a year earlier and a consensus estimate of $ 9.45 billion compiled by the bank.

Revenues fell 4% due to a low interest rate environment, especially in Asia, where it derives most of its money, and a weaker performance of its investment bank compared to a strong first half last year.

Growth is expected to come from managing the money of the richest clients and shifting investment banking resources from Europe and the United States to Asia, chief executive Noel Quinn told Reuters.

“We are only in the early days of economic recovery, we have to see all these numbers become the trend for the future, we are encouraged but there is still a lot to do,” he said.

Quinn said he did not expect appetite for investment in China to decline after regulatory crackdowns upended standards in the country’s tech, real estate and home tutoring sectors. , leaving some foreign investors bruised and uncertain.

“We see strong liquidity looking for investment opportunities in Hong Kong and Asia,” he said.

In a separate call with analysts, Quinn also said HSBC was aiming for targeted acquisitions in Asia outside of China to expand its wealth management business, adding that the bank “was considering three or four at the time we let’s talk “in areas such as insurance and asset management.”

HSBC stock rose 0.7% in London, in line with a 0.9% gain in the benchmark.

INCOME PRESSURE

Unlike its competitors, HSBC has failed to capitalize on a frenzy in stock quotes and tech company fundraisers after choosing not to join the current boom in special purpose acquisition company listings ( SPAC).

“It was a very conscious decision to stay away from SPACs as this industry is at high risk of litigation,” CFO Ewen Stevenson told Reuters.

HSBC’s investment banking income fell 23% in the second quarter compared to the same period a year ago, at a time when Wall Street banks and US-focused competitors such as Barclays (LON 🙂 performed well.

The bank also saw its profit before tax in Asia drop 6%, a drop according to Stevenson that was “almost entirely due to the cut in interest rates.” Longer-term and shorter-term Hibors, the benchmark lending rates in Hong Kong, hit a 10-year low for most of the quarter.

On a more positive note, HSBC said that given the more favorable outlook globally as economies recover from the pandemic faster than expected, it expects credit losses to be less than its medium-term forecasts of 0.3% to 0.4% of its loans.

He said that for the year he might be able to free up funds from previous arrangements rather than adding to them, but it was difficult to give a clear picture due to the unknown impact of the programs. government support, vaccine deployments and new strains of the virus.

He also said he would move closer to his target distribution range of 40-55% of published earnings per share by 2021.

HSBC plans to pay an interim dividend of seven cents per share after the Bank of England removed payment restrictions last month. This compares to its interim dividend of $ 0.31 per share before the 2019 pandemic.


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