HSBC resumes half-year dividend as profits more than double

·Senior City Correspondent, Yahoo Finance UK
·3-min read

Watch: HSBC profit more than doubles

HSBC (HSBA.L) has confirmed plans to resume its interim dividend payout as profits at the bank rebound soar.

HSBC said on Monday it would pay an interim cash dividend of $0.07 per ordinary share. The bank paid no interim dividend last year as COVID-19 and a ban on payouts from regulators led to a lean year for investors.

The bank now expects to hit is target dividend payout range of between 40% and 55% of earnings by the end of this year.

Read more: Lloyds Bank bounces back to £3.9bn profit as pandemic impact fades

An HSBC advert at Nottingham train station, England. Photo: PA
An HSBC advert at Nottingham train station, England. Photo: PA

The resumption of the half-year payout came as HSBC reported rapidly rebounding profits. Pre-tax profit more than doubled in the first six months of the year to hit $10.8bn (£7.7bn). HSBC was boosted by the release of $700m from loss provisions, as the global economic outlook improved. The bank was also helped by a strong performance at its UK franchise.

Rising profits came despite a 4% drop in revenues to $25.6bn. The fall reflected tough comparable numbers at HSBC's markets and investment banking division, which saw surging sales during the pandemic.

"These are good results that reflect the return of growth in our main markets and marked progress in the execution of our strategy," chief executive Noel Quinn said in a statement.

"We were profitable in every region in the first half of the year, supported by the release of expected credit loss provisions. Our lending pipeline began to translate into business growth in the second quarter and we further strengthened that pipeline during the half. This performance enables us to pay an interim dividend for the first six months of 2021."

Shares in the bank rose 1.2% at the open in London.

HSBC shares rose on the update. Photo: Yahoo Finance UK
HSBC shares rose on the update. Photo: Yahoo Finance UK

HSBC's results follow similar bumper numbers from rivals Barclays (BARC.L), Lloyds (LLOY.L), and NatWest Group (NWG.L) last week. All three announced plans to resume interim dividends as profits soar.

Quinn is currently overhauling HSBC and announced an acceleration of his transformation plan in February. Costs rose 3% in the first half of 2021 as bankers earned bigger bonuses thanks to rebounding profits.

Quinn he was "pleased with the momentum" of the turnaround plan. HSBC is pivoting to Asia and more fee-generating businesses, such as wealth management. The bank plans to axe 35,000 jobs by 2022 as part of the transformation plan.

Read more: Barclays ups dividend and announces buyback as profits quadruple

Susannah Streeter, a senior investment and market analyst at stockbroker, said HSBC's Asian business was performing well but flagged concerns about reputation risks in China and the knock-on effects of Beijing's ongoing crackdown on tech companies.

"Worries are now rife that there could be a downturn in investment due to Beijing’s crackdown on tech and online educational firms in particular," she said. "So far the bank says it isn’t changing its forecasts of investment pouring in to seek out opportunities, but the days are still early, and there are some concerns it could upset its resilient recovery."

HSBC said there were "continued revenue headwinds" due to COVID-19, low interest rates, and more normal market conditions in business lines like fixed income trading. However, the bank said there were "emerging signs of unsecured personal lending and commercial lending growth".

Watch: Will interest rates stay low forever?

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