HSBC has reported a surge in first-half profits and resumed dividend payments as fears it would suffer a heavy hit from loan losses caused by the coronavirus pandemic eased.
Pre-tax profits at Europe’s biggest lender climbed to $10.8 billion from $4.3 billion a year earlier, surpassing the $9.5 billion that had been expected by City analysts.
Like rivals Barclays, Natwest and Lloyds Banking Group, HSBC’s interim profits have been buoyed by its decision to release cash it had set aside as a buffer last year, when there were concerns banks would suffer from a wave of borrower defaults during the Covid-19 crisis.
It freed up $719 million during the six months to the end of June, compared with a $6.9 billion impairment charge it had taken a year earlier when worries about loan loss were mounting.
Yet while profits were up, revenues slid to $25.6 billion from $26.7 billion in 2020 as HSBC was squeezed by the low interest rate environment around the world. Its net interest margin, which is the difference between the interest rates at which a bank raises deposits and the rates at which it lends money, slipped by 22 basis points to 1.21 per cent.
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Britain’s biggest lenders were temporarily blocked by the Bank of England’s Prudential Regulation Authority from paying dividends during the crisis, to ensure commercial lenders retained enough cash to support the economy.
Those limits were lifted last month and HSBC said with its results that it was reinstating shareholder cash returns with the payment of an interim dividend of 7 cents a share.
The lender is usually one of the biggest dividend payers on the London stock market. It said it now expected to be within its target dividend payout ratio of 40 per cent to 55 per cent of earnings per share next year.
Noel Quinn, HSBC’s chief executive, said: “These are good results that reflect the return of growth in our main markets and marked progress in the execution of our strategy.
“We were profitable in every region in the first half of the year, supported by the release of expected credit loss provisions. Our lending pipeline began to translate into business growth in the second quarter and we further strengthened that pipeline during the half.”
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HSBC is one of the world’s biggest banks, with a significant focus on China and the wider, fast-growing emerging markets.
Quinn, 59, is in the midst of restructuring the group to boost its profitability by cutting costs and tilting the lender even further towards Asia.
His plan includes cutting 35,000 jobs as part of a target to remove $4.5 billion of costs by next year, and HSBC also offloaded its loss-making retail business in France in June.
