What led HSBC to resume dividend pay-outs despite a drop in profits

February 23, 2021 11:27 PM AEDT | By Team Kalkine Media

What led HSBC to resume dividend pay-outs despite a drop in profits

Earnings beat estimates

The bank reported a pre-tax profit of US $8.78 billion (£6.25 billion) for the full year, down from US $13.35 billion from 2019. It also reported an annual income of US $50.4 billion, which was better than previous estimates of profit before tax of US $8.3 billion, for an income of US $50 billion for the year.

The bank also set aside an additional US $1.2 billion in Q4 2020 as a provision for bad debts after it faced a spike due to the pandemic’s impact. It’s total bad debt cover for 2020 touched US $8.8 billion.

New dividend policy

The leading bank announced the resumption of paying out dividends following the lifting of the UK’s central bank’s temporary ban in December last year. It plans to pay out a final dividend of 15 pence per share, its first pay out since Q3 2019. The ban was aimed at sustaining UK located financial services companies’ liquidity challenges due to the Covid crisis.

Want to know more? Do read: HSBC Indicate Dividend Payment amid Regulators Consideration of Letting Banks Pay Dividend

The bank’s CEO Noel Quinn said the bank is considering share buy-backs in the long term, revoking scrip dividend option offers, making cash dividend pay-outs and stopping quarterly dividends this year.

Quinn added that the bank may make an interim pay-out in August. Moreover, it aims to have a pay-out ratio between 40 to 55 per cent of its EPS from 2022 onwards.

Asia pivot

HSBC had announced a reshuffle of its senior management on Monday ahead of the earnings results. Moreover, the company announced its plans to focus on the Asian markets and on its wealth and personal banking divisions in a strategy update.

It plans to make a US $6 billion investment into the region and aims to scale back its presence from other geographies. The banks said it is currently in talks for the sale of its retail banking arm in France. Moreover it is also planning to close its retail banking arm in the US, according to Reuters.

Stock price

HSBC (LON:HSBA) stock prices were trading at GBX 425.15, down by 1.51 per cent as of

23 February at 9:13 AM GMT.

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