HSBC earnings beat expectations, rebuffs Ping An call for break-up

HSBC reported a 15 per cent dip in first-half profit as credit loss provisions rose, but the fall was not as bad as feared and Europe’s biggest bank lifted its returns guidance in the belief that rising interest rates will boost revenue.

In a sign of growing confidence in its ability to improve profitability despite the global economic uncertainty, HSBC raised its near-term return on tangible equity goal to at least 12 per cent from 2023 onwards.

The London-headquartered lender reported on Monday (Aug 1) a pre-tax profit of US$9.2 billion for the 6 months ending Jun 30, down from US$10.84 billion a year ago but beating the US$8.15 billion average estimate of analysts compiled by the bank.

The bank said it would pay an interim dividend of 9 US cents per share and that it intends to revert to paying quarterly dividends from the start of 2023. It also said share buybacks remain unlikely this year.

“We understand and appreciate the importance of dividends to all of our shareholders. We will aim to restore the dividend to pre-Covid levels as soon as possible,” chief executive Noel Quinn, who has been running HSBC for more than 2 years, said in the results statement.

HSBC said Asia’s share of profit went up to 69 per cent in the first half from 64 per cent a year ago.

The bank has come under pressure from its largest shareholder, Ping An Insurance Co of China, to explore strategic options such as spinning off its mainstay Asian business to unlock greater shareholder value.

Since then, the proposal has won support from some retail investors in Hong Kong who were disgruntled with dual-listed HSBC’s decision to cancel its dividend payment in 2020.

A Hong Kong politician has urged HSBC to spin off its Asia business and appoint representatives of Ping An to its board, as the global lender prepares to meet with Hong Kong shareholders on Tuesday.

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However, HSBC on Monday pushed back on a proposal by Ping An to split the lender, a move Europe’s biggest bank said would be costly. In its most direct comments yet to calls for the break-up, HSBC said a demerger or spin-off of its Asian business risks huge one-off execution costs, higher taxes, ongoing running costs for the bank and potential regulatory setbacks.

The bank did not directly make a reference to Ping An’s call for splitting the bank but, in an implied rebuttal to the Chinese insurer, said it is accelerating the restructuring of its US and European businesses, and will rely on its global network to continue to 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,” Quinn said in the earnings statement.

HSBC reported a US$1.1 billion charge for expected credit losses, as heightened economic uncertainty and rising inflation put more of its borrowers into difficulties. REUTERS