HSBC has pledged to restore dividends to pre-pandemic levels ‘as soon as possible’ as it pushed back against calls by major shareholder Ping An for the bank’s break-up.
The UK lender told investors it would pay an interim dividend of 9 cents (7p) per share and also aim to revert to quarterly dividends next year, despite posting falling profits.
It made a pre-tax profit of $9.2billion in the first half, down from $10.8billion a year ago, but ahead of analysts’ estimates. Revenues were flat at $25.2billion.
Falling profit: HSBC booked a $1.1bn charge for expected credit losses
The 15 per cent fall in profit comes as the bank booked a $1.1billion charge for expected credit losses, as heightened economic uncertainty and rising inflation put more of its borrowers into difficulties.
But expenses were down 4 per cent, and higher interest rates lifted net interest income – the difference between what a bank makes from its loans to customers and its own interest expenses.
‘We understand and appreciate the importance of dividends to all of our shareholders,’ said chief executive Noel Quinn.
‘We will aim to restore the dividend to pre-COVID-19 levels as soon as possible.’
And while not directly rebuffing Ping An’s call for splitting the bank, Quinn said the group would rely on its global network to continue drive profits.
‘Our strength as a well connected, global institution is the main reason our wholesale clients choose to bank with us and we are determined to capitalise on the advantages our network gives us,’ he said.
His comments come after Ping An, the state-backed Chinese insurer that has built an 8 per cent stake over recent years, launched a campaign in April to force the split of HSBC Asian operations from the UK business.
‘Powering up the dividend is a clear pushback against calls by Ping An to break up the business,’ said Neil Wilson, an analyst at Markets.com.
The bank is based in Britain, with a substantial presence on UK high streets, but it makes most of its money in Asia.
The region’s share of profit went up to 69 per cent in the first half, from 64 per cent a year ago, its results show.
In comparison, Europe’s share of profit nearly halved from 18.2 per cent to 9.6 per cent. Profits were down in both these regions, which are its biggest ones.
There were more positive contributions from North America and the Middle East/North Africa, although combined these two regions account for only 17 per cent of group profits.
HSBC shares in London jumped 6.4 per cent to 546.40p in morning trade on Monday. They have risen by around 38 per cent over the last year.
Mark Crouch, an analyst at eToro, said HSBC’s latest results were mixed.
‘It is disappointing that group reported pre-tax profit is down, although this is due mainly to a charge to cover credit losses, while foreign currency exchange rates can be partly blamed for the slight dip in revenue,’ he said.
‘Looking forward, rising interest rates are expected to boost the bank’s net interest margin, the difference between what it charges on its mortgages and hands out on its savings accounts.
‘That will support profitability, unless it needs to set more cash aside to cover bad loans, something which may well happen in the current environment.’