Thursday, July 7, 2022
Finance

HSBC Holdings’ profit more than doubles

HSBC

HSBC reported pretax profit of $10.8 billion, compared with the $4.32 billion in the same period a year earlier

HSBC Holdings beat forecasts on Monday as its H1 pretax profit more than doubled from last year when it set aside $7 billion to cover pandemic-related bad loans.

HSBC reinstated dividend payments encouraged by an economic rebound in its two biggest markets of Hong Kong and Britain, flagged higher payouts in the future, and released $700 million that had been set aside as provisions. It also said share buybacks were under review as an option after ruling them out earlier this year.

Europe’s biggest bank is benefiting from better resilience on the part of companies grappling with the pandemic. That said, a decline in revenue underscored longer-term challenges.

HSBC reported pretax profit of $10.8 billion, compared with the $4.32 billion in the same period a year earlier and a consensus estimate of $9.45 billion compiled by the bank.

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

Growth should come from managing more wealthy customers’ money and shifting investment banking resources from Europe and the United States to Asia, Chief Executive Noel Quinn told Reuters.

We’re still in the early days of the economic rebound, we need to see all those numbers become the trend for the future, we are encouraged but there is more still to go, he said.

Quinn said he did not expect any decline in investment appetite for China after regulatory crackdowns have upended norms for the country’s tech, property and private tutoring sectors, leaving some overseas investors bruised and uncertain. We see strong liquidity seeking investment opportunities in Hong Kong and Asia.

In a separate call with analysts, Quinn also said HSBC was targeting bolt-on acquisitions in Asia outside China to expand its wealth management business, adding the bank was looking at three or four as we speak in areas including insurance and asset management.

HSBC’s shares added 0.7% in London and gained 0.9% in the FTSE index.

Revenue for HSBC’s investment bank declined 23% in Q2 compared with the same period a year ago at a time when Wall Street banks and U.S.-focused rivals have seen strong performances.

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

It said that for the year, it might be able to make a net release of funds from earlier provisions rather than add to them, but it was hard to give a definite view due to the unknown impact of government support programmes, vaccine rollouts and new strains of the virus.

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