HSBC raises profitability target on higher rates and doubles profits

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  • HSBC 2021 pre-tax profit $18.9 billion vs. $8.8 billion in 2020
  • Says expected to achieve double-digit return on equity by 2023
  • Says rising interest rates around the world will boost incomes
  • announces $1 billion share buyback
  • London shares fall 3.4% in weaker market

SINGAPORE/LONDON, Feb 22 (Reuters) – HSBC (HSBA.L) brought forward its key profitability target by a year and more than doubled its full-year profit as bad debts expected from the COVID-19 pandemic do not did not materialize, and he pointed to rising interest rates increasing his income.

Like its global peers, HSBC, one of Europe’s largest banks, is benefiting from lower than expected impairment charges as its borrowers benefit from government support in coronavirus-hit markets, while the economic recovery is also helping businesses.

Shares of HSBC lost 3.4% in afternoon trading on Tuesday, against a 1.4% decline in the benchmark FTSE index (.FTSE) as global stocks stumbled after the intensification of the Ukrainian crisis. Read more

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“We have good momentum heading into 2022 and are confident we can continue to execute on our strategy,” Group Chief Executive Noel Quinn said in the earnings release.

London-headquartered HSBC said it would buy back up to $1 billion of its own shares after completing an existing $2 billion buyback programme.

He said if central bank interest rates rise around the world as expected, the resulting improvement in credit spreads would hit his target of double-digit return on equity in 2023, a year earlier. provided that.

“Given their large footprint in Asia, it will be interesting to see whether the zero COVID policy in the region will negatively impact their performance against their other more UK-centric London rivals in 2022,” said Sudeepto Mukherjee, head of financial services at Publicis Sapient.

Quinn, who has led the bank permanently for the past two years, has doubled down on efforts in Asia by moving global leaders there and is investing billions of dollars in the lucrative wealth management industry.

The lender reported pre-tax profits of $18.9 billion last year, up from $8.8 billion a year earlier, and just below the $19.1 billion average. dollars from 17 analyst estimates compiled by HSBC. Asia contributed 65% of the profit.

Citi analysts said HSBC’s guidance for this year was broadly in line with consensus, “with downside risks to provisions and upside risks to capital return.”

The bank said it took a charge of $500 million for expected credit losses in the quarter, mostly due to a slowdown in China’s struggling commercial real estate sector.

HSBC expects a weaker performance from its wealth management in Asia in the first quarter of 2022.

HONG KONG MARKET

HSBC chief financial officer Ewen Stevenson told Reuters the wealth management business would be hurt by weak global markets and bank branch closures in Hong Kong, but the bank expected a rebound later This year.

As Asia and most global economies open up, Hong Kong – HSBC’s largest market – is tightening pandemic brakes as it battles a growing outbreak of COVID-19, stoking concerns about the economic impact. Read more

HSBC’s results come after Standard Chartered (STAN.L) raised its key profitability targets by betting on inflation-fighting rate hikes to boost lending. Read more

London-listed shares of HSBC have gained 29% over the past year, compared with a 16% rise in StanChart and a 25% rise in Barclays (BARC.L).

The bank said revenue fell 2% in 2021 due to low global interest rates and lower revenue from its markets business, but said rising rates this year and beyond should help reverse the trend.

“After absorbing the impact of low interest rates for a while, we believe we’ve turned the corner on earnings,” Quinn said.

HSBC said it released $900 million in cash it had set aside in case bad debts related to the pandemic increase, as opposed to the corresponding period a year earlier when it took on an 8 charge. $.8 billion over expected losses.

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Reporting by Anshuman Daga in Singapore and Lawrence White in London; Editing by Kenneth Maxwell and Clarence Fernandez

Our standards: The Thomson Reuters Trust Principles.

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