27th Apr 2021 06:31
(Alliance News) - HSBC Holdings PLC said Tuesday it kicked off 2021 with with a sharp jump in pretax profit - boosted by credit releases - and is confident its new direction and focus will lead to revenue growth.
The Asia-focused lender said it is not planning quarterly dividends in 2021 but said it may consider an interim dividend. HSBC paid a USD0.15 per share dividend for 2020, declared as an interim payout with its full year results in February.
Pretax profit in the three months to March 31 improved 79% to USD5.78 billion from USD3.23 billion the year before. In the first quarter, HSBC's expected credit losses came out as a net release of USD400 million compared to the mammoth USD3.0 billion charge seen a year before.
The net release in provisions primarily reflected an improvement in the economic outlook from 2020, the bank explained.
The bank reported growth from all regions, with Asia profit growing slightly to USD3.76 billion but European and North American operations swinging to profit from a loss a year before.
In Europe, HSBC recorded a profit of USD997 million compared to a USD511 million loss a year before, while North America swung to a USD484 million profit from a USD111 million loss.
Middle East & North Africa profit improved markedly to USD337 million from USD44 million, while Latin America profit rose to USD203 million from USD67 million.
Group revenue was down 5.1% to USD12.99 billion from USD13.69 billion as the lender's net interest margin slipped to 1.21% from 1.54%.
Chief Executive Noel Quinn said: "We had a good start to the year in support of our customers, while achieving materially enhanced returns for our shareholders. I am pleased with our revenue and cost performance, but particularly with our significantly lower expected credit losses. 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. We also strengthened our lending pipelines in our retail and wholesale businesses."
HSBC's cost efficiency ratio worsened to 65.7% from 57.4%.
The bank ended the first quarter with a CET1 ratio of 15.9%, which is up from 14.6% at the same point a year earlier and unchanged from the end of 2020.
HSBC's loan book ended March at USD1.040 trillion, flat on the year before, but did improve from the end of 2020 - boosted by growth in Wealth & Personal Banking, notably mortgages in the UK and Hong Kong, and in Commercial Banking in areas of strategic focus.
Customer accounts rose to USD1.650 trillion from USD1.440 trillion.
"The execution of our growth and transformation plans is proceeding well. We made further progress in reducing both costs and risk-weighted assets, and launched new products and capabilities in areas of strength," Quinn continued.
Looking ahead, HSBC said the economic outlook has improved, giving it increased confidence in its revenue growth plans. It expects mid-single-digit percentage growth in customer lending during 2021.
Based on current consensus economic forecasts, HSBC guided for the expected credit losses charge for 2021 to be below the medium-term range of 30 basis points to 40 basis points of average loans.
The bank said it expects to update shareholders on the progress of its new strategic plan in August, in the release of its interim results.
Quinn added: "The economic outlook has improved, although uncertainties remain. We carry good momentum into the second quarter, while maintaining conservative positions on capital, funding, liquidity and credit."
Shares in HSBC were trading 2.3% higher at HKD46.15 in Hong Kong on Tuesday.
By Paul McGowan; [email protected]
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