LONDON (BLOOMBERG) – HSBC Holdings has delivered better-than-estimated profits, vowing to restore paying quarterly dividends next year as it seeks to head off a call by its largest shareholder to split up.
Adjusted pre-tax profits rose 13 per cent to US$5.97 billion (S$8.24 billion) in the second quarter, driven by increases in commercial banking and markets, according to a statement from the London-based bank. The bank was seen posting a profit of US$4.96 billion in a survey of Bloomberg analysts.
“The progress that we have made growing and transforming HSBC means we are in a strong position as we enter the current rates cycle,” chief executive officer Noel Quinn said in a statement. “We are confident of achieving a return on tangible equity of at least 12 per cent from 2023 onwards, which would represent our best returns in a decade.”
HSBC said it will seek to restore its quarterly dividend by next year, a key measure to satisfy demands from its Hong Kong investor retail base. In April, it emerged that HSBC’s biggest individual shareholder, China’s Ping An Insurance Group, was pressing the bank to carve out its Asian unit as a stand-alone business. Ping An has argued that the move would provide investors with a purer investment in the region’s growth.
Ping An has yet to make any public comment and instead has preferred to operate a behind-the-scenes campaign aimed at amping up pressure on HSBC to revise its strategy. HSBC has hired advisers from investment banks Goldman Sachs and Robey Warshaw to do a review of its business to rebut Ping An’s call.
The bank intends to revert to paying quarterly dividends in 2023, though it said this is expected to initially be reinstated at a lower level than the historical quarterly dividend of 10 US cents a share paid up to the end of 2019.
The results come months after HSBC reported first-quarter results that led it to say that further share buy-backs were unlikely this year as it warned of a drop in its core capital ratio due to regulatory changes and a hit on its interest rate hedge.
HSBC is in the midst of its own turnaround that is focused on building up its position in Asia, particularly in wealth management, while culling operations no longer deemed relevant. The bank has already sold off units in the United States, France and Greece, and recently said it would be selling its remaining operations in Russia.