HSBC lowers ambitions on dividends, returns after pandemic-induced annual profit fall

HSBC lowers ambitions on dividends, returns after pandemic-induced annual profit fall

News: HSBC lowers ambitions on dividends, returns after pandemic-induced annual profit fall.

HONG KONG / LONDON (Reuters) – HSBC Holdings PLC on Tuesday abandoned its long-term profitability target and unveiled a revamped strategy primarily focused on asset management in Asia and the Middle East after annual earnings fell sharply.

Given the low interest rate environment and difficult market conditions, HSBC abandoned its long-term profitability target of achieving a 10% -12% return on tangible equity and instead went for 10% in the medium term.

The bank announced it would pay a dividend of $ 0.15 per share in cash. This was the first payout announced since October 2019 after the Bank of England banned all major lenders from paying dividends or buying back shares in 2020 to save capital.

However, a target payout ratio of 40% to 55% of the reported earnings per common share from 2022 was aimed for.

Between 2008 and 2018, the bank paid an average of 47.2 cents per share per year, according to Refinitiv, although analysts and investors expect lower dividends in the coming years.

HSBC also announced that it will significantly cut some of its back office functions, such as technology and operations, without disclosing the number of jobs affected.

The announcement came when HSBC reported a 34% decline in annual earnings, slightly better than expected, after a year of badly hit global business by the COVID-19 pandemic.

Europe’s largest bank by asset, which generates most of its sales in Asia, posted pre-tax profits of $ 8.78 billion in 2020, compared with $ 13.35 billion in the previous year.

The profit was above the average of the bank’s analyst estimates of $ 8.33 billion.

Future growth in Asia will be driven by additional investment in wealth and international wholesale of approximately $ 6 billion over the next 5 years, HSBC said.

Reporting by Alun John and Lawrence White; Editing by Shri Navaratnam

Original Source © Reuters

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