HSBC to pay dividend after Q2 profit beats estimates

London

HSBC Holdings will pay an interim dividend and is considering share buybacks as the lender said the global economy was starting to emerge from the worst effects of the pandemic.

The bank will pay out 7 US cents a share after adjusted second-quarter profit doubled from a year earlier to top analyst estimates, according to a statement on Monday. The jump came as Europe's biggest lender joined its British peers in reversing loan provisions that it booked in the early stages of the pandemic.

"We definitely feel more confident," chief financial officer Ewen Stevenson said. "We will keep buybacks under review" together with dividends.

The dividend comes after the Bank of England removed its curbs on cash payouts last month. HSBC said it expects to meet its target of paying out 40-55 per cent of earnings in dividends this year.

The bank is one of the biggest dividend payers in European banking, and after a year of restrictions is expected to set aside more than any of its rivals this year and next, according to estimates collated by Bloomberg Intelligence.

Adjusted profit rose to US$5.56 billion in the second quarter, topping analysts' estimates of US$4.73 billion, although costs were higher than expected, driven by spending on technology and higher performance-related pay, even after it reduced headcount by around 3,500 in the first half of the year.

Revenue at the investment bank was down more than a fifth as trading revenue slumped on lower market volatility. Advisory revenue also dropped on lower client activity and lower interest rates.

HSBC began a fresh restructuring this year that aims to refocus the bank on the Asian markets where it makes most of its money. The bank wants to manage more assets for the region's wealthiest residents - a lucrative but highly competitive market.

In May, HSBC sold 90 branches in the US, marking a retreat from mass-market banking in the country. Weeks later, the company agreed on a potential disposal of its unprofitable French retail business.

As part of its wealth expansion, the bank has hired 600 wealth managers in Asia in the first half of the year and is eyeing deals in the region.

"We are currently looking at a number of smaller opportunities in the wealth space across Asia, spanning insurance, asset management and traditional wealth," Mr Stevenson said on Monday.

HSBC joins rivals Barclays and Lloyds Banking Group over the past week in unwinding some of their preparations for a wave of bad loans during the pandemic. Banks have reported strengthening demand for home loans and low levels of impairments as Britons get back to work and leisure without restrictions.

In April, HSBC began to release credit provisions it had piled up in the early stages of the Covid-19 outbreak, saying the outlook for UK borrowers in particular was improving after more than a year of pandemic turmoil.

This quarter, the lender released a net US$284 million from last year's provisions for loans that could turn sour during the pandemic, compared to a US$4.2 billion charge in the same period last year. HSBC said it expects impairment charges for 2021 to be "materially lower" than its medium range and "possibly a net release for the year". BLOOMBERG