Encouraged by an economic rebound in its two biggest markets of Hong Kong and Britain, HSBC reinstated dividend payments, flagged higher payouts in the future, and released $700 million that had been set aside as provisions. It also said share buybacks were under review as an option after ruling them out earlier this year. Europe’s biggest bank is benefiting from better-than-hoped for resilience on the part of companies grappling with the COVID-19 pandemic. That said, a decline in revenue underscored longer-term challenges. HSBC reported pretax profit of $10.8 billion, higher than the $4.32 billion in the same period a year earlier and a consensus estimate of $9.45 billion compiled by the bank. Revenue fell 4% due to a low interest rate environment especially in Asia, where it makes most of its money, and a weaker performance from its investment bank compared to a strong first half last year.
Growth should come from managing more wealthy customers’ money and shifting investment banking resources from Europe and the United States to Asia. Unlike its competitors, HSBC has failed to benefit from a frenzy in stock listings and tech company fundraisings after opting not to join the current boom in special purpose acquisition company (SPACs) listings. Revenue for HSBC’s investment bank slid 23% in the second quarter against the same period a year ago at a time when Wall Street banks and U.S.-focused rivals such as Barclays (BARC.L) have seen strong performances. On a more positive note, HSBC said given the brighter outlook globally as economies recover faster than expected from the pandemic, it expects credit losses to be below its medium-term forecast of 0.3%-0.4% of its loans. HSBC plans to pay an interim dividend of seven cents a share after the Bank of England scrapped pay out curbs last month. That compares with its interim dividend of $0.31 per share in pre-pandemic 2019.