HSBC said it would resume paying a dividend and invest more heavily in Asia despite announcing a 34 per cent drop in annual profits after its global business was hit hard by the coronavirus pandemic.
Europe’s largest bank performed slightly above analysts’ expectations in 2020 although it was weighed down by loan losses, reporting profit before tax of $8.8bn, down from $13.4bn the previous year.
It outlined plans to invest about $6bn in fast-growing markets in Asia, particularly in wealth management, and said it would expand “beyond Hong Kong” — its largest market — including in mainland China and Singapore.
In the fourth quarter, adjusted profit slid 50 per cent year on year to $2.2bn, just above the $1.8bn estimated by analysts. Meanwhile, impairment charges for bad loans climbed $1.2bn to $8.8bn over the period. Adjusted profits before tax for 2020 were down 45 per cent to $12.1bn.
The bank said on Tuesday that it would start paying a dividend of $0.15 a share after a Bank of England ban on shareholder payouts was partially lifted late last year.
“We have had a good start to 2021, and I am cautiously optimistic for the year ahead,” Noel Quinn, HSBC chief executive, said in a statement.
Quinn and chairman Mark Tucker are accelerating a radical overhaul of HSBC’s global operations in order to galvanise performance and win back sceptical investors, which have sold out of the stock in recent years.
The bank will shift $100bn of capital to Asia, relocate a string of global business heads from its UK headquarters to Hong Kong, cut 35,000 jobs in Europe and the US, and boost plans to become a market leader in wealth management in Asia. It is also in talks to close down its US retail banking presence.
This week, HSBC reshuffled its top executives ahead of its results. On Tuesday, it announced it would also shake-up its board with Laura Cha, the chair of Hong Kong Exchanges and Clearing, stepping down in May.
“In 2020, we experienced economic and social upheaval on a scale unseen in living memory,” Tucker said. “The external environment was being reshaped by a range of factors — including the impact of trade tensions between the US and China, Brexit, low interest rates and rapid technological development.”
“The spread of the Covid-19 virus made that environment all the more complex and challenging.”
HSBC shares jumped by as much as 7 per cent in Hong Kong on Tuesday. The stock has risen by almost 18 per cent this year, but remains down by more than a fifth from its pre-pandemic levels in early 2020.
HSBC has been caught up in geopolitical tensions between the west and China that have left the Hong Kong-founded lender in a precarious position.
It has been severely criticised by British MPs and US politicians over its endorsement of a controversial national security law Beijing imposed on Hong Kong, and for closing the accounts of pro-democracy activists in the territory.
It has also been slammed by Chinese state media for providing information to US prosecutors that led to the arrest of a top executive at Chinese telecoms group Huawei.