HSBC raises profit target, pledges return to dividends

The firm posted a pre-tax profit of $9.17bn, down more than 15%.

Chief executive Noel Quinn said "it reflected a more normalised level of expected credit losses compared with the Covid-19 releases made last year, as well as the macroeconomic impact of the Russia-Ukraine war".

HSBC raised its near-term return on tangible equity target to at least 12% from 2023 onwards from an earlier forecast 10% minimum. Annual net interest income was expected to reach at least $31bn this year and $37bn next year as global interest rates rise.

The bank was among a number of major banks to cancel shareholder payouts during the pandemic, which angered some Hong Kong shareholders.

It is under pressure from Ping An, which has a 9.2% stake, to spin off its Asian operations, in a bid to unlock shareholder value amid tensions between China and the west.

"We have sympathy for Ping An and all our shareholders that our performance has not been where it needed to be for the last 10 years," Quinn told analysts.

Asia is HSBC's biggest profit centre, with the region's share of the lender's profit rising to 69% in the first half from 64% a year ago.

HSBC said a break-up would mean a potential long-term hit to the bank's credit rating, tax bill and operating costs, and bring immediate risks in executing any spinoff or merger.

Quinn told reporters the bank had hired external lawyers and consultants to weigh the costs and benefits of a split but found it would "not deliver increased value for shareholders”.

“Rather, they would have a material negative impact on value, and our current strategy is the fastest and safest way to get to the higher returns and dividends we all want to see … The primary factor is about disruption to, and potential loss of, the international synergies.”

HSBC’s analysis showed that carving out a relatively small European bank in a single market could cost more than $2bn.

AJ Bell investment director Russ Mould said the dividend pledge was "unlikely to do enough to satisfy Ping An’s appetite for major structural change and this battle of wills is likely to continue for the time being at least".

"For the health of the UK market it is probably preferable that HSBC’s management prevail, as such a move might threaten the status of one of London’s largest listed names."

Reporting by Frank Prenesti at Sharecast.com