HSBC Holdings Plc delivered better-than-estimated profits, vowing to restore paying quarterly dividends next year as it seeks to head off a call by its largest shareholder to split up.
Helped by rising interest rates and a jump in income from currency trading, adjusted pretax profits rose 13% to US$5.97 billion in the second quarter, according to a statement from the London-based bank. The bank was seen posting a profit of US$4.96 billion in a Bloomberg analysts survey.
“The progress that we’ve made growing and transforming HSBC means we are in a strong position as we enter the current rates cycle,” Chief Executive Officer Noel Quinn said in a statement. “We are confident of achieving a return on tangible equity of at least 12% from 2023 onwards, which would represent our best returns in a decade.”
HSBC said it will seek to restore its quarterly dividend by next year, a key move to satisfy demands from its Hong Kong investor retail base. In April, it emerged that HSBC’s biggest individual shareholder, China’s Ping Insurance Group Co., was pressing HSBC to carve out its Asian unit as a standalone business that it has argued would provide investors with a purer investment in the region’s growth.
Ping An has yet to make any public comment and instead has preferred to operate a behind-the-scenes campaign aimed at amping up pressure on HSBC to revise its strategy. HSBC has hired advisers from Goldman Sachs Group Inc. and Robey Warshaw to do a review of its business to rebut Ping An’s call.
In an interview with Bloomberg Television on Monday, HSBC Chief Financial Officer Ewen Stevenson said it’s hard to find value for shareholders in a potential split.
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HSBC intends to revert to paying quarterly dividends in 2023, though said it’s expected to initially be reinstated at a lower level than the historical quarterly dividend of US$0.10 a share paid up to the end of 2019.
Adjusted profit at key divisions in 2q
Global Banking and Markets: US$1.65b vs US$1.30b
Commercial Banking: US$1.76b vs US$1.45b
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Wealth and Personal Banking: US$1.82b vs US$1.87b
The results come months after HSBC reported first-quarter results that led it to say that further share buybacks were unlikely this year as it warned of a drop in its core capital ratio due to regulatory changes and a hit on its interest rate hedge.
HSBC is in the midst of its own turnaround that is focused on building up its position in Asia, particularly in wealth management, while culling operations no longer deemed relevant. The bank has already sold off units in the US, France and Greece, and recently said it would be selling its remaining operations in Russia.
HSBC said operating expenses were stable in the quarter. It booked expected credit losses of US$1.1 billion in the first half, citing “heightened economic uncertainty and inflation.” Its common equity tier 1 ratio, a sign of financial strength was 13.6%, decreasing by 2.2 percentage points from six months ago.
