HSBC’s profits surge – but will the share price?
Pre-tax profits at banking giant HSBC rose from $1.1bn last year to $5.1bn in 2021, but the share price remains depressed.
Last year HSBC took “billions of dollars” in loan losses, say Stephen Morris and Tabby Kinder in the Financial Times. Now it has announced an “almost fivefold rise in second-quarter earnings as the global economic outlook brightened”. Pre-tax profits “surged” from $1.1bn last year to $5.1bn in 2021, while the group “cancelled a further $300m of credit provisions”.
HSBC’s decision to reinstate its dividend is “another good sign” for shareholders, says Jennifer Hughes on Breakingviews. However, the fact that it is handing back “a mere seven cents a share for now”, suggests that HSBC’s management think that things are “only slowly moving in the right direction”. The payout, worth far less than half the group’s earnings, is pretty “meh” when set against UK rivals Barclays and NatWest. And while HSBC is saying that it will now “consider” buybacks, shareholders “shouldn’t hold their breath”. Don’t expect any major share-price rises either, says Emma Powell in The Times. Part of the problemis HSBC’s focus on Asia. In theory, it implies “arguably the greatest growth potential of any of the big five banks listed on the LSE”, since the region benefits from “an ascendant middle class and rising demand for wealth-management services”.
But the share price remains depressed by “geopolitical concerns”, especially the “fragile relations” between the West and China and Hong Kong, which account for half of its profits. HSBC is still feeling “intense heat” over its support of the national-security law that China imposed on Hong Kong.