HSBC Holdings Plc’s earnings beat estimates in the fourth quarter as the lender kept costs in check and signaled bigger investments to drive its pivot to faster-growing Asian markets.
Weighed down by loan losses, adjusted pretax profit slid 50% to $2.2 billion in the period, compared with a $1.80 billion estimate, the London-based bank said Tuesday. HSBC will resume paying a dividend of $0.15 after British regulators relaxed a ban intended to preserve capital last year after the virus outbreak.
“We have had a good start to 2021, and I am cautiously optimistic for the year ahead,” Chief Executive Officer Noel Quinn said in a statement.
HSBC is pushing through one of the banking industry’s most radical responses to the pandemic in a strategic reset that comes as Chairman Mark Tucker said last month that “the world had changed.” Europe’s largest bank is shifting billions of dollars to beef up operations across Asia, seeking to become a market leader in wealth management by targeting a rapidly expanding affluent population in the region.
The bank outlined plans to invest about $6 billion in Asia, targeting wealth, commercial banking and markets to drive “double-digit growth in profit.” It singled out markets in southeast Asia such as Singapore, as well as China and Hong Kong.
Expected credit losses last year hit $8.8 billion, as expected at the low end of a previously announced range of $8 billion to $13 billion. It now expects them to be materially lower this year.
The bank stuck to a target of getting its cost base down to $31 billion or less in 2022 as well as a $100 billion reduction in gross risk-weighted assets. It doesn’t expect to reach a return on average tangible equity target of between 10% and 12% in 2022, but will now target a return of greater than or equal to 10% in the medium term.
