HSBC’s annual results: The bank is pushing even harder into Asia and wants to return its dividend

The bank – which is still headquartered in London, although it earns most of its money in Asia – told investors on Tuesday that it plans to “increase” its investments in the region by about $ 6 billion. More resources are also being redirected there, including relocating some key staff.

HSBC (HSBC) highlighted China, Southeast Asia and India as “key drivers” of its future growth. It especially wants to strengthen its presence in mainland China, defend its leading position in Hong Kong and establish Singapore as a center for wealth management. It remains under the influence of India, which made $ 1 billion in profits for the bank last year.
It is a plan that focuses on a continent that brought in more than 80% of HSBC’s profits before the pandemic. Last year, Asia “was again by far the most profitable region,” President Mark Tucker said in a statement.

The plan includes downsizing in some other markets. HSBC is negotiating the sale of the retail banking business in France and is exploring options for the U.S. retail department that could include sales.

Pivot in Asia comes when HSBC’s pre-tax profit fell to $ 8.8 billion last year, down 34% from a year earlier. Revenue fell 10% to $ 50.4 billion.

Still, it was better than analysts had expected. And the bank said Tuesday it intends to return its dividend “as soon as possible,” starting at 15 cents a share.

Adapting to the Covid Economy

Like other lenders, HSBC was forced to cancel a dividend last year at the request of UK regulators. The Bank of England relaxed some of those guidelines in December.

“This was a difficult decision and we deeply regret the impact it has had on our shareholders,” Tucker said in a statement, adding that the board has since “adopted a policy designed to deliver sustainable dividends in the future.”

HSBC shares rose 2.2% in Hong Kong on Tuesday, before withdrawing. Shares in London fell 1.1% at the start of trading.

Like other global banks, HSBC is under pressure from low interest rates around the world, fierce competition among large lenders and threats from digital beginners, according to Scott Russell, head of financial research in Asia at Macquarie Capital.

“The top-down image isn’t great,” Russell said.

HSBC CEO Noel Quinn acknowledged that the bank was hit hard by record low interest rates. On Tuesday’s earnings call, he estimated that HSBC had lost about $ 5.3 billion in potential net interest income.

“We don’t expect rates to recover any time soon,” he added.

Cutting costs

A year ago, HSBC unveiled a mammoth restructuring plan, which initially included the elimination of about 35,000 jobs. The bank later halted briefly and then accelerated the reorganization amid a coronavirus pandemic.
In recent months, the firm has placed more emphasis on fee-generating companies, while seeking to reduce manual labor by automating its back office.

“What does tomorrow’s HSBC look like? We’re actually taking three pivots: towards Asia, wealth and revenue,” Quinn said.

HSBC plans to accelerate restructuring as profits fall 36%

The bank hopes to project investor confidence. It was said on Tuesday that it will increase its goal of reducing costs by one billion dollars, taking its overall goal to 31 billion by 2022.

It is also sticking to a previous plan to abolish assets in the amount of 100 billion dollars by the end of next year, and it is already “more than halfway” to achieving that goal, according to Stevenson.

But there is a long way to go. HSBC “obviously has a lot of work to do in terms of restructuring to reduce its cost base, and that won’t happen fast,” said Russell of Macquarie Capital. “We’ll talk about that in the next few years.”

The bank argues that Asia is a natural place to double, primarily because of its existing ties and strong results.

“We’re going to stop trying to be everyone to everyone,” Quinn said. “We want to do things that take advantage of what we have and do it great.”