Europe's largest lender HSBC's full-year profit before tax more than doubled in 2021 and the bank announced a $1 billion share buyback amid a continued global economic recovery.
Pretax profit surged to $18.9bn last year, up from $8.8bn in 2020, driven by a net release of expected credit losses and other credit impairment charges, as well as a higher share of profit from the bank's associates, it said on Tuesday.
The results missed the $19.1 billion average estimate of 17 analysts compiled by HSBC itself.
All regions were profitable in 2021, notably HSBC UK, where reported profit before tax increased by $4.5bn to $4.8bn. The lender's Asia operations contributed $12.2bn to reported profit before tax and all other regions reported a material recovery in profitability.
HSBC said it released $900 million it had provisioned for bad loans, compared with an $8.8bn charge it booked against expected losses in 2020.
The bank's board approved a second interim dividend of $0.18 per share, bringing the total for 2021 to $0.25 per share. The lender plans a further share buyback of up to $1bn, after the existing $2bn buyback is concluded.
“We made good progress against our strategy in 2021, which contributed to a strong financial performance that was supported by the global economic recovery,” said group chief executive Noel Quinn.
“All of our regions were profitable and we saw growth in the fourth quarter of 2021 in many of our business lines.”
Fourth-quarter profit before tax increased by $1.3bn to $2.7bn as expenses and bad loan provisions fell while revenue grew. Adjusted profit before tax surged 79 per cent to $4bn.
Adjusted revenue in the fourth quarter rose 2 per cent to $12.1bn. The lender booked expected credit losses of $500 million, which included an increase in allowances to reflect developments in China’s commercial property sector.
“Good progress has been made in executing our strategic plan. A number of key milestones were reached in 2021 — including resolving the future of our retail businesses in France and the US, the organic build-out of HSBC Personal Wealth Planning in mainland China and acquisitions in Singapore and India to accelerate the development of our wealth capabilities across Asia,” said group chairman Mark Tucker.
“At the same time, our work to digitise HSBC and play a leading role in the net zero transition has continued at pace. There is more to do — and it will be important to see successive consecutive quarters of growth — but good momentum exists across our businesses.”
HSBC aims to cut emissions by 34 per cent from oil and gas clients by 2030. The bank said it is scaling up its investment and financing for renewable and other low-emission sources of electricity.
HSBC, which is increasingly focused on Asia to drive income, said despite lower global interest rates, revenue grew in strategic focus areas, including its wealth management and global trade and receivables finance businesses.
Its reported operating expenses broadly remained unchanged at $34.6bn while adjusted operating expenses dropped 1 per cent to $32.1bn, despite inflationary pressures, as the impact of “cost-saving initiatives and a reduction in the UK bank levy charge absorbed higher performance-related pay and continued growth in technology investment”, the bank said.
Customer lending in 2021 was up $8bn from the previous year on a reported basis and $23bn on a constant currency basis, driven in part by growth in mortgage balances, primarily in the UK and Hong Kong markets.
“We carry good business momentum into 2022 in most areas and expect mid-single-digit lending growth over the year,” the bank said.
However, it expects a weaker wealth business performance in Asia in the first quarter of this year.
HSBC said its expected loan losses charges will normalise towards 30 basis points of average loans in 2022, based on current consensus economic forecasts and default experience.
“Uncertainty remains, given recent developments in China’s commercial real estate sector, while inflationary pressures persist in many of our markets,” it said.
“We continue to target 2022 adjusted operating expenses in line with 2021, despite inflationary pressures, with cost to achieve spend of $3.4bn expected to generate over $2bn of cost savings in 2022.”
A combination of business growth, acquisitions and regulatory changes, will drive business growth this year and the bank's net interest income outlook is now “significantly more positive".
“If policy rates were to follow the current implied market consensus, we would expect to deliver a RoTE [return on tangible equity] of at least 10 per cent for 2023, one year ahead of our previous expectations.”