Financial Results

Adjusted Pre-Tax Profit Dips At HSBC's Wealth, Personal Banking Arm

Tom Burroughes, Group Editor, 1 August 2022

articleimage

The Hong Kong/London-listed banking group became the latest in a series of financial institutions to report its results. Wealth and personal banking pre-tax profit fell in the half-year period.

(Updated with Spring comments.)

The wealth and personal banking arm of HSBC – which includes its private banking arm – logged an adjusted pre-tax profit of $2.946 billion in the half-year to June 2022, a decline from $3.751 billion a year earlier.

Operating costs at this business division stood at $7.411 billion, up from $7.277 billion a year before; net operating income was $10.349 billion, from $11.018 billion, HSBC said in a statement today. 

“The past six months have been volatile for stock markets around the world in an already challenging economic backdrop marked by the effects of the pandemic, inflation, geo-political tensions and risks of recession,” Annabel Spring, CEO, HSBC Global Private Banking, said. 

“Our resilient results demonstrate the trust and partnership of our clients in the first half of this year, during which our wealth and personal banking business, which includes global private banking, attracted $39 billion in net new invested assets,” Spring said. 

Spring listed a number of expansion moves by the private bank in recent months, such as expanding onshore private banking in mainland China and Taiwan; launching online structured products trading for clients in Asia; rolling out Triple-1, a proposition for sophisticated investors, with self-directed execution in Switzerland and the UK; extending wealth Lombard lending to Premier clients in Hong Kong, Singapore and UAE, and going live with its enhanced digital-first Premier proposition in Hong Kong, mainland China and Taiwan.

Group results
HSBC reported a profit for the half year to end-June 2022, attributable to shareholders, of $8.289 billion, up from $7.276 billion a year ago. The banking group’s cost-efficiency ratio narrowed to 65.1 per cent from 66.9 per cent a year before. Reported pre-tax profit, meanwhile, fell by $1.7 billion to $9.2 billion, reflecting a net charge for expected credit losses and other credit impairment charges, compared with a net release a year ago. Headline results for banks have oscillated in recent years because of the pandemic, with banks setting aside money to cover expected credit impairments, and then releasing such money as lockdowns ended, and vice versa.

Shares in the bank rose by almost 6 per cent today, at around 543 pence per share. The decision by the bank to return to quarterly dividends cheered investors, analysts said. 

“We expect investors to welcome the bank’s decision to return to quarterly dividends next year and to return to pre-covid levels of payouts as soon as possible. It is that sort of announcement that can provide a big boost to a firm’s share price,” Mark Crouch, analyst at social investment network eToro, said. 

Reported after-tax profit rose by $800 million to $9.2 billion; that figure included a $1.8 billion gain on the recognition of a deferred tax asset on historical losses, as a result of improved profit forecasts for the UK tax group, which accelerated the expected use of those losses, HSBC said. Reported operating costs fell 4 per cent, mainly caused by the impact of foreign exchange movements. On an adjusted basis, costs fell 1 per cent. 

The banking group said its Common Equity Tier 1 ratio, a standard international measure of capital buffer, was 13.6 per cent at the end of June.

“The progress that we’ve made growing and transforming HSBC means we are in a strong position as we enter the current rates cycle,” Noel Quinn, HSBC chief executive, said. “We are confident of achieving a return on tangible equity of at least 12 per cent from 2023 onwards, which would represent our best returns in a decade.” 

“As a result, we are providing more specific dividend payout ratio guidance of around 50 per cent for 2023 and 2024. We understand and appreciate the importance of dividends to all of our shareholders. We will aim to restore the dividend to pre-Covid-19 levels as soon as possible. We also intend to revert to quarterly dividends in 2023,” Quinn said. 

HSBC’s directors approved an interim dividend for the 2022 half year of $0.09 per ordinary share regarding the year ending 31 December 2022. 

As previously announced, the Hong Kong/London-listed banking group said that last year and in 2022 it speeded up restructuring, selling retail banking businesses in France and branch operations in Greece, as well as exiting the domestic mass market retail banking in the US. The planned sales in France and Greece are expected to complete in 2023 and the US exit has been completed. It has also entered into an agreement to sell its Russian retail business.

Register for WealthBriefing today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes