HSBC profit doubles, loan-loss fears ebb

HSBC Holdings beat forecasts on Monday with first-half pretax profit that more than doubled from last year when it set aside $7 billion to cover pandemic-related bad loans.

Encouraged by an economic rebound in its two biggest markets of Hong Kong and Britain, HSBC reinstated dividend payments, flagged higher payouts in the future, and released $700 million that had been set aside as provisions.

Like rivals, Europe’s biggest bank is benefiting from better-than-hoped for resilience on the part of companies grappling with the Covid-19 pandemic. That said a decline in revenue underscored that HSBC still has longer-term challenges ahead.

HSBC’s pretax profit came in at $10.8 billion, higher than the $4.32 billion logged in the same period a year earlier and a consensus estimate of $9.45 billion compiled by the bank.

Revenue fell 4 per cent due to a low interest rate environment especially in Asia, where it makes most of its money, and a weaker performance from its investment bank compared to a strong first-half last year.

Growth is set to come from a renewed focus on fees from managing wealthy customers’ investments and shifting more of its investment banking resources from Europe and the United States to Asia, Chief Executive Noel Quinn told Reuters.

“We’re still in the early days of the economic rebound, we need to see all those numbers become the trend for the future, we are encouraged but there is more still to go,” he said.

Quinn said he did not expect any decline in investment appetite for China after regulatory crackdowns have upended norms for the country’s tech, property and private tutoring sectors, leaving some international investors bruised and uncertain.

“We see strong liquidity seeking investment opportunities in Hong Kong and Asia,” he said.

HSBC’s shares rose 1.7 per cent in London, outperforming a 1 per cent gain in the benchmark FTSE index. Its Hong Kong shares were up 1.1 per cent.