HSBC resumes dividend payout, post-tax income falls by 30pc to US$6.1b

Business | 23 Feb 2021 12:01 pm

HSBC announced that it will resume paying dividends - enitirely in cash, rather than scrip dividend - as it reported annual results for 2020 today. The bank said it will also consider share buybacks ''over time.''

The bank said an interim dividend for 2020 of US$0.15 per ordinary share will be paid. This would be a distribution of about HK$3.055 billion.

According to HSBC, it has 194,000 shareholders in 130 countries and territories.

HSBC said 2020 post-tax profit fell by 30 percent to US$6.1 billion from the year before.

Pre-tax profit was down by 34 percent to US$8.8 billion from higher expected credit losses and other credit impairment charges and lower revenue, partly offset by a fall in operating expenses.

Results in 2020 include a US$1.3bn impairment of software intangibles, while reported results in 2019 included a US$7.3 billion impairment of goodwill.

Adjusted profit before tax was down by 45 percent to US$12.1 billion.

The basic earnings per share were US$0.19.

Net interest income for 2020 fell by 9.5 percent on-year, or US$2.9 billion to US$27.6 billion, due to lower average market interest rates across the major currencies compared with 2019. This was partly offset by interest income associated with the increase in average interest-earning assets of US$170.1 billion or 8.8 percent, HSBC said. 

Net interest margin was 1.32 percent, down by 26 basis points from 2019.

Interest income was US$41.8 billion, down by US$12.9 billion or 24 percent.

Asia was once again by far the most profitable region for the HSBC, Group Chairman Mark Tucker, said in the earnings statement.

“Deposits also increased significantly across the group, reinforcing the strength of our funding and liquidity positions.''

He said the bank was “pleased to restart dividend payments at the earliest opportunity.''

The fourth interim dividend for 2019 was canceled in response to a request from the UK’s Prudential Regulation Authority, he said.

“We also announced that, until the end of 2020, we would make no quarterly or interim dividend payments or accruals in respect of ordinary shares. This was a difficult decision and we deeply regret the impact it has had on our shareholders.''

Noel Quinn, group chief executive, said the results were solid in the context of the pandemic – particularly in Asia – and lays firm foundations for future growth.

He said dividends are ''hugely important, but so is capacity for growth.''

To deliver both, he said, HSBC is adopting a new policy designed to provide sustainable dividends, offering good income while giving management the flexibility to reinvest capital to grow the firm over the medium term.

''We will consider share buy-backs, over time and not in the near term, where no immediate opportunity for capital redeployment exists. We will also no longer offer a scrip dividend option, and will pay dividends entirely in cash.''

HSBC said revenue for the year was down by 10 percent to US$50.4 billion. This was mainly due to lower interest rates, partly offset by higher revenue in global markets, the bank reported.

Adjusted revenue fell by 8 percent to US$50.4 billion.

Expected credit losses and other credit impairment charges increaed by US$6.1 billion to US$8.8 billion, mainly due to the impact of the coronavirus disease outbreak and the forward economic outlook, the bank said.

Allowance for expected credit losses on loans and advances to customers increased from US$8.7 billion at December 31, 2019 to US$14.5 billion at December 31, 2020, HSBC reported.

Deposits increased by US$204 billion on a reported basis and US$173 billion on a constant currency basis in 2020.

Common equity tier 1 ratio was 15.9 percent, up by 1.2 percentage points from 14.7 percent at December 31, 2019, which included the impact of the cancellation of the fourth interim dividend of 2019 and changes to the capital treatment of software assets.  

The bank's return on average tangible equity in 2020 was 3.1 percent, down by 530 basis points from 2019.

Total assets of US$2.98 trillion  were US$269 billion, or 10 percent higher than at December 31,  2019 on a reported basis, and 7 percent higher on a constant currency basis. 

HSBC's net profit for 2020 dropped to US$3.89 billion.

At the close Tuesday, HSBC shares gained by 0.43 percent at HK$46.70. Shares worth HK$4.93 billion were transacted.



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