FTSE 100: HSBC resolves to restore dividend after profit estimates

HSBC posted better-than-expected earnings in the first half, despite economic barriers and pressure to break through its Asian and Western businesses. Photo: Reuters/Lim Huey Teng

HSBC (HSBA.L) slashed earnings estimates for the second quarter and vowed to restore the quarterly dividend next year as it battles pressure from its largest shareholder to split its Western and Asian operations.

The bank promised to restore dividends to pre-pandemic levels, a key measure to meet demands from its Hong Kong investor retail base, and begin paying quarterly dividends from early 2023.

HSBC said it would pay an interim dividend of 9 cents per share, but share buybacks are unlikely this year as it warned of a decline in its core capital ratio and a hit to its interest rate hedge due to regulatory changes.

“We understand and appreciate the importance of dividends to all of our shareholders. We will aim to restore dividends to pre-COVID-19 levels as soon as possible,” Quinn said.

The FTSE 100 (^FTSE) lender reported a pretax profit of $9.2bn (£7.6bn) for the six months ended June 30, up from $10.8bn a year earlier. This surpassed the consensus of £8.2bn.

Europe’s largest bank said a 15% drop in pretax profits reflected expected credit losses and net charges of $1.1bn for credit losses as a result of economic uncertainty and increased inflation.

Profit before tax in the second quarter jumped to $5 billion on estimates of $3.9 billion, but fell slightly from the $5.1 billion reported a year earlier.

The bank said on Monday that adjusted pretax profit rose 13% to $5.97 billion in Q2, driven by growth in commercial banking and markets. It expects net income to reach £37bn next year.

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It posted revenue in line with expectations of $12.8bn in the second quarter, and is up about 2% compared to the same period last year.

According to HSBC, for the first half of 2022, revenue was $25.2 billion, marginally lower than in 2021 due to planned trade settlement and foreign exchange impacts.

The bank said it held talks with Ping An (PNGAY) and pushed back on its calls for a break up.

Chief executive Neil Quinn said on a call with the media on Monday that the separation or spinoff of its Asian branch risks huge execution costs, higher taxes and ongoing costs for the bank.

London shares jumped 5.9% after the opening bell, while Hong Kong-listed shares of HSBC (0005.HK) were up 4.9%, reversing earlier losses.

However, the London-based lender raised its near-term profitability target to at least 12% from next year, despite global economic uncertainty.

“The progress we have made and transforming and transforming HSBC means we are in a stronger position as we enter the cycle of current rates,” Quinn said in a statement.

“We are confident of achieving a return on tangible equity of at least 12% since 2023, which would represent our best return in a decade.”

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Since the report surfaced in April, HSBC has faced mounting pressure to bow to demands from its largest shareholder, Ping An, to divest the businesses, which hold about 9.2% of the lender’s shares. Is the owner.

Although based in London, HSBC makes most of its money in Asia and about a third of its shares are owned by private investors in Hong Kong.

In 2020, many of these smaller shareholders were outraged when the Bank of England temporarily banned large British lenders from paying dividends during the pandemic as part of emergency measures to improve the sector’s resilience. . It lifted the ban in July 2021.

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