HSBC profits surge to $5.8bn on Covid-19 recovery hopes
Banking giant HSBC this morning announced a surging pre-tax profit of $5.78bn (£4.16bn) for the first quarter, up from $3.21bn a year ago and well above an average analyst forecast of $3.35bn.
Revenue, however, fell five per cent to $13bn in the three months to 30 March as low interest rates in its main markets constrained the bank’s ability to generate large revenues from lending.
An improving global outlook, “notably in the UK” meant the bank released $400m of provisions for bad debts. HSBC had set aside an additional $3bn a year earlier as the impact of the pandemic began to hit.
Europe’s largest lender said all regions were profitable in the first quarter, with HSBC’s UK banking unit reporting a pre-tax profit of $1bn (£720m).
Shares were trading in London at midday up 2.8 per cent to 434p per share.
Noel Quinn, group chief executive, said: “We had a good start to the year in support of our customers, while achieving materially enhanced returns for our shareholders.
“Global Banking and Markets had a good quarter, and we saw solid business growth in strategic areas, including Asia Wealth and trade finance, and mortgages in Hong Kong and the UK.”
HSBC, which makes the bulk of its profits in Asia, said its credit losses for 2021 were likely to be below the medium-term range of 30-40 basis points it forecast in February.
Interactive Investor’s head of markets Richard Hunter said the results from HSBC were welcome, but the banking giant had a long way to go.
“The swing to profit from a previous loss in most regions, notably Europe and North America, begin to lay the foundations of a recovery, and the 79 per cent improvement in pre-tax profit, albeit against a softer comparative, is promising.
“Much remains to be done however, such as a transformation programme which has yet to land.
“In the meantime, it has contributed to a worsening cost/income ratio, now standing at 65.7 per cent versus a previous 57.4 per cent, with an unhelpful rise of nine per cent in operating expenses overall”.
HSBC in February announced a revised strategy to focus mainly on wealth management in Asia, aiming to earn more revenue from client fees rather than the difference between the interest rates the bank offers savers and charges borrowers.
The bank told investors this monring it was continuing negotiations for the sale of its French retail banking business, but no final decision has been taken. Reuters reported last month that HSBC had entered final negotiations to sell the business, which has 270 branches, to private equity firm Cerberus.