Annual profits

HSBC doubles annual profit as it plans $1 billion share buyback

HSBC makes the bulk of its profits in Asia, with China and Hong Kong being the main growth drivers. Photo: Carlo Allegri/Reuters

HSBC (HSBA.L) more than doubled its annual profit to $18.9bn (£13.9bn) and announced plans to buy back shares worth up to $1bn as the lender was helped by lower bad debts and operating expenses.

The London-based bank said in a statement on Tuesday that pre-tax profit increased by $10.1 billion to $18.9 billion, with 65% of profits generated in Asia.

HSBC said its UK branch saw a jump in profits to $4.8 billion in 2021 after profiting $300 million in the previous 12 months.

The bank said the increase was due to a net release of expected credit losses and other credit impairment charges, as well as a higher share of earnings from its associates.

The bank’s board approved a second interim dividend of $0.18 per share, for a 2021 total of $0.25 per share, with all regions reporting earnings

The lender also announced plans for a $1 billion share buyback, adding to a $2 billion takeover announced late last year.

Read more: What are share buybacks?

“We have good momentum heading into 2022 and are confident we can continue to execute on our strategy,” chief executive Noel Quinn said in the statement.

Revenue for the quarter rose 2% from the same period a year ago to $12 billion, while pretax adjusted profit for the year was $21.9 billion, or an increase of 79%.

Shares of Hong Kong-listed HSBC fell 3% on Tuesday, in line with the city's benchmark Hang Seng index's 3.3% losses.  Chart: Yahoo Finance UK

Hong Kong-listed HSBC shares fell 3% on Tuesday, in line with losses of 3.3% for the city’s benchmark Hang Seng index. Chart: Yahoo Finance UK

The lender said if central bank interest rates rose around the world as expected, the resulting improvement in its lending margins would mean it would hit its target of a double-digit return on equity. in 2023, a year earlier than expected.

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

“We also remain mindful of the potential impact that the additional uncertainty related to COVID-19 and continued inflation could have on us and our customers,” Quinn said.

The bank has increased its staff bonus pool to $3.5bn (£2.6bn), a move it says was justified given its strong financial performance and the need to compete for bankers in an “extraordinarily competitive labor market”.

“It is critical to our long-term performance that we continue to attract and retain the talent needed to deliver on our strategic priorities,” HSBC said.

Report shows 451 of his bankers received $1million (£832,000) or more last year, with Quinn winning at home $12.4 million house (£9 million).

“While HSBC’s pre-tax profits nearly doubled in the last quarter of 2021, beyond that headline figure the bank’s results were a bit mixed,” commented Will Howlett, equity analyst at Quilter Cheviot.

“HSBC released pre-tax profits which were actually slightly below expectations, reflecting higher loan loss charges, including increased provisions for Chinese commercial real estate, which follow market concerns,” he added.

The past few years have been dominated by repeated restructuring at the lender, which embarked on a restructuring program aimed at cutting 35,000 jobs to refocus on its most profitable areas in Asia and the Middle East.

“HSBC’s results are really mixed, but that’s commonplace with most banks these days. In a nutshell, the commercial bank is doing well and its return target could be reached a year earlier than expected.

“However, there are headwinds in its Central Asian territory, including uncertainty around the Chinese real estate market, and the share buyback program has only been extended up to $1 billion, far less than some analysts had expected,” Russ Mould, chief investment officer at AJ Bell, said.

Richard Hunter, Head of Markets at Interactive Investor, commented: “The disappointing reaction to the figures in Hong Kong overnight spread to the UK at the start of trading as earnings rose sharply but remained below expectations.

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