Excellent John K. Kumi is a cryptocurrency and fintech enthusiast, operations manager of a fintech platform, writer, researcher, and a huge fan of creative writing. With an Economics background, he finds much interest in the invisible factors that causes price change in anything measured with valuation. He has been in the crypto/blockchain space in the last five (5) years. He mostly watches football highlights and movies in his free time.
The company’s pretax profit was $8.78 billion in 2020, which is a 34% fall from the previous year. This beats the analyst expectation of an $8.33 billion pretax profit.
HSBC Holdings PLC (NYSE: HSBC), Europe’s largest bank by asset, in their report on the 2020 results disclosed that they have paid all dividends for the first time since the COVID-19 pandemic broke out. Not just that, HSBC has beaten analyst’s 2020 profit expectation.
The company’s pretax profit was $8.78 billion in 2020, which is a 34% fall from the previous year. This beats the analyst expectation of an $8.33 billion pretax profit. Its reported revenue was also down by 10% from the previous year with $54.43 billion in 2020.
Noel Quinn, the company’s group chief executive commenting on the report confirmed that the COVID-19 pandemic had a great impact on their yearly earnings.
“The shutdown of much of the global economy in the first half of the year caused a large rise in expected credit losses, and cuts in central bank interest rates reduced revenue in rate-sensitive business lines, ” he said.
HSBC Profit and Losses
The credit losses of the company increased to $8.8 billion from $6.1 billion in 2019. Also, as a measure of lending profitability, the Net Interest margin decreased from 1.58% in 2019 to 1.32% in 2020 according to the earning report. It was also reported that the common equity tier 1 ratio which was about 14.7% in 2019 rose to 15.9% in 2020. Just as said earlier, an interim dividend of 15% shares was announced, and according to the report, a new dividend policy has been introduced.
There is a consideration of share buy-back over time instead of the near future. The scrip dividend option will no longer be offered as the company has decided to pay all dividends in cash. HSBC further reported that there will be an interim payout at its half-year report in August as they have no intention of paying quarterly dividends in 2021.
On the reported earnings per share, there will be a 40% to 55% range of payout ratio from 2022 onwards according to HSBC. Currently, they aim to focus on Asia after declaring their plan on investing $6 billion over there coupled with focusing on their wealth and personal banking business.
The Question of Where HSBC Belongs
The question of where HSBC belongs has been intense since it moved its headquarters to London. Commercially, it is evident from its full-year results that Hong Kong is where the company belongs as it made two-third of its pretax profits from there. Compared to the performance of operations in other regions, Asia is their stronghold with HSBC moving their senior staff to the region.
Though the Hong Kong economy just like any other economy was affected by the global pandemic coupled with the channeling of its capital to China, it is expected that residents who have within their possession liquid assets of $1 million or more will enjoy a 12% increase over the next 5 years. HSBC can take advantage of Hong Kong’s financial future as they make the region their new home.