Home / NEWS / Finance / HSBC resumes dividend payment as 2020 pre-tax profit beats estimates

HSBC resumes dividend payment as 2020 pre-tax profit beats estimates

HSBC structure in the Canary Wharf district of London, U.K.

Leon Neal | AFP | Getty Images

HSBC on Tuesday reported full-year earnings for 2020 that strike expectations and announced a dividend payout for the first time since the Covid-19 pandemic.

Europe’s largest bank by assets, which manufactures most of its revenues in Asia, said its reported profit before tax for 2020 fell 34% from a year ago to $8.78 billion. That worn out analyst expectations of $8.33 billion, according to estimates compiled by HSBC.

Reported revenue was $50.43 billion for the year, down 10% from 2019.

HSBC’s up to the minute financial report card was released as Hong Kong markets went for a lunch break. Its Hong Kong-listed helpings jumped 5% when trading resumed.

“The pandemic inevitably affected our 2020 financial performance,” Noel Quinn, HSBC’s troupe chief executive, said in a statement accompanying the latest earnings report for the London-headquartered bank.

“The shutdown of much of the pandemic economy in the first half of the year caused a large rise in expected credit losses, and cuts in central bank share rates reduced revenue in rate-sensitive business lines,” he added.

Here are other highlights of the bank’s financial circulate card:

  • Expected credit losses increased by $6.1 billion in 2019 to $8.8 billion last year as HSBC shored up stockpiles in anticipation of the pandemic’s hit to business prospects.
  • Net interest margin, a measure of lending profitability, was 1.32% in 2020 — lower than 1.58% a year ago due to discount interest rates globally.
  • Common equity tier 1 ratio was 15.9% at the end of last year, up from 14.7% a year ago.

Transforms to dividends

HSBC’s board announced an interim dividend of 15 cents per share — its first payout since the third post of 2019.

Quinn, however, said the bank has a new policy on dividends to balance offering income to investors and investing in HSBC’s crop over the medium term.

“We will consider share buy-backs, over time and not in the near term, where no closest opportunity for capital redeployment exists. We will also no longer offer a scrip dividend option, and will pay dividends unambiguously in cash,” said the CEO.

The bank also said it will not be paying quarterly dividends in 2021, but will consider an interim payout at its half-year follow-ups in August. From 2022 onward, the bank would target a payout ratio of between 40% and 55% of published earnings per share.

HSBC had halted dividend payments last year as British regulators urged lenders to preserve capital.

But the Bank of England in December said British banks can resume paying some dividends, and Barclays conclusive week announced it would resume such payouts and embark on a 700 million pounds ($985.4 million) helping buyback.

Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.

Check Also

Stocks will remain attractive despite rising Treasury yields, Morgan Stanley predicts

The hawk may have turned a corner on inflation fears. But according to Morgan Stanley’s …

Leave a Reply

Your email address will not be published. Required fields are marked *