Singapore, Feb. 21 (BNA): HSBC’s profit soared 92% as higher interest rates swelled net interest income, but its shares fell 2% as it failed to raise a key performance target even as Europe’s largest bank handed out dividends to investors and returned stock purchase. Bonanza.
The London-based bank said on Tuesday it plans to pay a special dividend of $0.21 per share as a priority to use the proceeds from the $10 billion sale of its Canada business once the disposition is completed late this year, Reuters reported.
But some analysts expected HSBC to also raise its key performance target of reaching a return on tangible equity of at least 12% from this year onwards, a target the bank stuck to in its earnings report. Its Hong Kong shares were down 2.1% by 0540 GMT.
HSBC’s asset disposals have accelerated in the past year as it brushed off pressure from its largest shareholder, Ping An Insurance Group, which urged the bank to spin off its Asian business to boost returns, a move HSBC rejected.
“While achieving higher returns, we will increase distribution capacity, and we will also consider a special dividend once the sale of HSBC Canada is completed,” Group CEO Noel Quinn said in a statement.
Meanwhile, HSBC said it still expected to complete the sale of its Russia business in the first half of 2023, incurring a loss of $300 million.
Shares of London-listed HSBC, which is currently trading at their highest levels in about three-and-a-half years, have rebounded 45% from their lows in October 2022 when a drop in quarterly profit and a sudden change in chief financial officer spooked investors and sent its shares down 7%.
Since Quinn took over in March 2020 just as the COVID-19 pandemic was sweeping across the world, shares are up 25% although they still underperform a 50% rally in the broader market. So far this year, shares are up 20% against a 7% rise in the FTSE.
More is to come, said Quinn, who has overseen a program of job cuts in recent years aimed at stripping layers of the bank’s bloated management structure.
“There will be absolutely no cost mitigation… We are now considering up to $300 million in additional costs for separation in 2023,” he said.
The Asia-focused bank, which counts Hong Kong as its largest market, also said it will return to paying a quarterly dividend in 2023, and advance consideration of new share buybacks to the first quarter of 2023.
It reported pre-tax earnings of $5.2 billion for the fourth quarter, up from $2.7 billion a year ago and ahead of the average analyst estimate of $4.96 billion collected by the bank.
HSBC said expected annual credit losses rose to $3.6 billion, more than the $3.2 billion expected by analysts, due to high inflation squeezing borrowers and persistent problems in China’s real estate market.
Despite the increase in the most recent quarter, annual profit fell to $17.5 billion from $18.9 billion for 2021, due to a $2.4 billion impairment related to the sale of the bank’s retail operations in France.
That matches an average estimate of $17.5 billion by 22 analysts compiled by the bank.
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