HSBC returns to paying dividendsTop News | Avery Chen and agencies 24 Feb 2021
HSBC resumed its long tradition of paying dividends yesterday with a payout of 15 US cents per share in cash when it reported a better-than-expected annual profit.
Its shares had a roller-coaster day, ending only 0.43 percent higher at HK$46.70 after a 6.5 percent rise earlier.
Pretax profit plunged 34 percent to US$8.8 billion (HK$68.64 billion) last year, weighed down by mounting credit losses amid the pandemic. But that was higher than the US$8.33 billion average of analysts' estimates.
Adjusted profit before tax slumped 45 percent to US$12.1 billion. Expected credit losses surged to US$8.8 billion from US$6.1 billion 12 months before.
It was paying an interim dividend - the first payout since the third quarter of 2019 - after UK regulators lifted a ban on dividends and share buybacks to preserve capital amid the pandemic.
It will not resume its pre-pandemic practice of paying dividends on a quarterly basis, but an interim dividend with the half-year results in August would be considered.
It also lowered the payout ratio to between 40 percent and 55 percent for 2022 onward compared to the more than 70 percent in recent years.
But chief financial officer Ewen Stevenson expects dividends to be higher than 55 percent of earnings, though he ruled out share buybacks this year.
Conita Hung Lai-ping of Tiger Faith Asset Management said the quarterly news might disappoint conservative retail investors. She does, however, expect shares to consolidate between HK$45 and HK$50 in the short term.
Facing margin pressure and mounting losses in Europe, HSBC also said it will spend more than US$6 billion over the next five years to expand in Asia, which contributed more than half of profit. Around half of the investment will be for Greater China.
The bank is also in talks about selling its French retail business and is exploring options for its US retail banking franchise.
HSBC also set out plans to reduce its office space globally by 40 percent over the long term as part of a cost-cutting drive.
There was no update on the aim of cutting around 35,000 jobs - a plan unveiled a year ago.