HSBC said it would consider paying a “conservative” dividend for 2020 after Europe's largest bank announced better-than-expected third-quarter earnings due to lower bad loan provisions.
The lender on Tuesday reported a 36 percent year-over-year decline in pre-tax income to $ 3.1 billion for the three months ended September, up ahead of bank analysts' guidance of $ 2.1 billion. Noel Quinn, Managing Director of HSBC, described the results as "promising".
HSBC shares rose as much as 5.3 percent on Tuesday after the results were released in Hong Kong, reaching their highest level in about two months.
HSBC canceled its payout for the first time in 74 years earlier this year under pressure from the Bank of England, angering Hong Kong shareholders. A payout for 2020 would depend on the bank's forecasts for 2021 and its consultations with regulators. "We'll try to pay a conservative dividend when circumstances permit," Quinn said.
The provision for bad loans decreased to $ 785 million in the third quarter, compared to $ 3.8 billion in the previous quarter. The average analyst forecast for the third quarter was provisions of $ 2 billion.
The lender reckoned total credit losses would be closer to the lower end of the $ 8 billion to $ 13 billion range previously forecast for the full year.
"This latest forecast, which remains subject to a high degree of uncertainty due to Covid-19 and geopolitical tensions, assumes that the likelihood of a further significant deterioration in the current economic outlook is small," the bank said.
The slower rate of new provisioning in the third quarter came as the global economy was tentatively reopened on the tight lockdowns triggered by the pandemic.
This was in line with last week's trend at Barclays, which was earning an additional £ 608m, which was well below the £ 3.7bn reserved in the first six months of the year.
HSBC revenue for the third quarter declined 11 percent year over year to $ 11.9 billion.
HSBC's shares are down more than 40 percent this year as the lender grapples with the combined challenges of coronavirus, a UK regulation ban on dividends, extremely low interest rates, and a confrontation between China and the west over Hong Kong, its most important has market.
The bank expected further cost reductions. It would seek to lower its original target of $ 31 billion for its annual cost base for 2022 and release a "detailed and updated" transformation plan when it releases its full-year results.
Chairman Mark Tucker and Mr. Quinn are re-evaluating a strategy that was unveiled in February, preparing deeper cuts, and examining selling off companies that continue to perform poorly, such as the U.S. retail arm, the FT reported.
Quinn said Tuesday that the smaller decline in pre-tax profit for the quarter was due in part to lower expected credit losses and "continued good cost management."
HSBC expects to ramp up investment in Asia as the region's economies "recover strongly" from the pandemic. The bank announced that it would provide an update on the future of its French and US operations in February 2021.
The bank highlighted the passage of a national security law and US sanctions against 11 Hong Kong officials among a list of risks to their business. The US has threatened secondary sanctions against financial institutions for not severing ties with officials.
"The financial impact on the geopolitical risk group in Asia is increased due to the strategic importance of the region, and particularly Hong Kong, in terms of profitability and growth prospects," said HSBC.