HSBC beats 2020 earnings forecast, resumes dividends

Published (HKT): 2021.02.24 07:00

HSBC has beaten expectations of its 2020 full-year earnings and pledged to pay dividends to shareholders for the first time since the start of the COVID-19 pandemic.

The London-based bank on Tuesday reported a pre-tax profit of US$8.78 billion, down 34% from a year ago but exceeding analysts’ consensus estimate of US$8.33 billion.

Net profit in the fourth quarter improved, to US$562 million from a loss of US$5.5 billion the previous year. Overall, net profit for the whole of 2020 was US$3.89 billion, lower than the US$5.97 billion posted a year ago.

HSBC said that provisions for potentially soured loans, known as expected credit losses, reached US$8.8 billion last year, which the bank’s chief executive Noel Quinn attributed to the shutdown of the global economy due to the coronavirus.

Aside from the “large rise” in expected credit losses, revenues in rate-sensitive businesses also took a hit because central banks cut interest rates, Quinn added.

HSBC said it would give out full-year dividends of US$0.15 per share for 2020, its first payout since the third quarter of 2019. The bank would target a payout ratio of between 40% and 55% of reported earnings for 2022 onward.

Quinn ruled out a scrip dividend option, which would have allowed investors to be paid in the form of more shares. He said the upcoming dividends would be entirely in cash, and added that the bank would only consider share buybacks “over time and not in the near term.”

HSBC’s Hong Kong-listed shares briefly rose by 5% after the lunchtime release of the earnings report and closed at HK$46.70, a 0.43% increase.

On Tuesday, the bank also announced investing US$6 billion in its Asia operations, especially in wealth and personal banking businesses, to reflect a stronger focus on the region.

“I believe we have a very successful platform already in existence in Asia, particularly in Hong Kong. A lot of that wealth comes from the business customers that we already bank and we have a proven track record of converting that business from wholesale banking to wealth,” Quinn said in a call with journalists.

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