HSBC more than doubles full-year pre-tax profit

HSBC’s pre-tax profits almost doubled to $2.7bn in the final quarter of 2021 as the UK lender’s commercial banking revenues were buoyed by growth in credit and lending.

The London-based bank said in an earnings statement on Tuesday that full-year pre-tax profits increased 115 per cent to $18.9bn, just missing forecasts of $19.1bn.

The bank also revealed a dividend of $0.18 cents a share and a buyback worth up to $1bn to begin after the completion of its $2bn share repurchased announced in October.

Revenue for the quarter rose 2 per cent compared with the same period a year ago, to $12bn, while adjusted profits before tax for the year came in at $21.9bn, a 79 per cent increase. The annual results were boosted by a net release of $900mn in credit provisions as the global economy recovered from the shock of the coronavirus pandemic.

The bank said it made net provisions of $500mn in the quarter, including for “uncertainty” in China’s property sector. HSBC added that it retained $600mn in Covid-related allowances at the end of 2021 to cover the impact of the pandemic.

Chief executive Noel Quinn said the group’s outlook had become “significantly more positive”, with global interest rates set to rise. “After absorbing the impact of low interest rates for some time, we believe we have turned the corner on revenue,” he said.

But Quinn warned that HSBC remained “cognisant of the potential impact that further Covid-19-related uncertainty and continued inflation might have on us and our clients”.

On an annual basis, net operating income recovered 21.3 per cent to $50.48bn, as increases in fee income and income from assets for the bank’s insurance business offset a slight decline in net interest income. Annual revenue fell 2 per cent to $49.6bn.

HSBC’s annual performance last year was a marked swing from 2020, when the bank’s provisions for bad debts exceeded $8bn at the peak of coronavirus lockdowns, eventually pushing annual profit down 45 per cent to $12.1bn.

HSBC is in the middle of a multiyear plan to redeploy $100bn of capital to Asia, trim $4.5bn in costs, cut thousands of jobs in Europe and the US and invest heavily in becoming a market leader in wealth management in Asia.

A year ago, it reinforced this strategic shift to Asia and retreat from the west. The lender subsequently sold its retail operations in the US and France, and it is partway through a programme to invest $6bn to expand in Hong Kong, China and Singapore, hiring more than 5,000 wealth advisers in the region.

HSBC shares fell 3.7 per cent in Hong Kong on Tuesday, roughly in line with losses of 3.3 per cent for the city’s benchmark Hang Seng index. The share price has recovered 27 per cent in the past 12 months after hitting a 25-year low in September 2020, weighed down by pandemic lockdowns, ultra-low interest rates and geopolitical tension between the US and China.