HSBC raises key profitability target and seeks to dismiss call for split


HSBC tried to woo investors with a higher profitability target and optimistic dividend outlook on Monday as Europe’s biggest bank slammed down a proposal by main shareholder Ping An Insurance Group Co of China to split up.

The London-headquartered bank has raised its target for short-term return on tangible equity to at least 12 percent from 2023, from a previously marked minimum of 10 percent. HSBC also said it intends to resume paying quarterly dividends beginning in early 2023.

Shares of HSBC rose nearly 7 percent in early London trading on Monday, making it the best performer on the benchmark FTSE 100 index.

“We understand and appreciate the importance of dividends for all of our shareholders. We will strive to return the dividend to pre-Covid-19 levels as quickly as possible,” Chief Executive Noel Quinn, who has led HSBC for more than two years, said in the earnings statement.

HSBC said it will pay an interim dividend of 9 cents per share. It also said share buybacks were unlikely this year.

The bank’s Hong Kong-listed shares recouped early losses to rise 3.7 percent in afternoon trade in a weak broader market.

HSBC has come under pressure from Ping An to explore strategic options such as spinning off its main business in Asia to seek greater shareholder value.

The proposal has garnered support from some Hong Kong retail investors, who were upset by second-listed HSBC’s decision to cancel its 2020 dividend payment.

A Hong Kong politician has urged HSBC to spin off its Asia operations and appoint representatives from Ping An to its board as the global lender prepares to meet with Hong Kong shareholders on Tuesday.

The bank has shared the results of a review by external consultants into the validity of its strategy with its board but will not publish them externally, Quinn told Reuters on Monday. “Look at the half-year results and you will see the value of the current strategy,” he said.

HSBC has not directly referred to Ping An’s call to break up the bank, but in a tacit rebuttal to the Chinese insurer on Monday it said it will accelerate the restructuring of its US and European businesses and will rely on its global network to help continue driving profits.

“Our strength as a well-connected, global institution is the primary reason our wholesale customers choose to bank with us, and we are committed to taking advantage of our network,” said Quinn in the earnings release.

HSBC reported pre-tax income of $9.2 billion for the six months ended June 30, down from $10.84 billion a year ago but topping the bank’s median estimate of $8.15 billion.

Asia’s profit share rose to 69 percent in the first half from 64 percent a year ago.

HSBC reported a $1.1 billion charge to expected loan losses as heightened economic uncertainty and rising inflation caused more of its borrowers to struggle. HSBC raises key profitability target and seeks to dismiss call for split

Fry Electronics Team

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