HSBC Profits Double, Reinstates Dividend Payments

Banking giant HSBC has announced its results for the first half of the year, seeing pre-tax profits rise to £7.8 billion. This was more than double the pre-tax profit for the same period in 2020 of £3.1 billion.

The striking rise in profits has been attributed to a better-than-expected economic rebound around the world and particularly in the key markets for the bank of Britain and Hong Kong. The British arm of the bank reported a profit of over £1.5 billion alone. However, the UK based bank said that it was profitable in every region, not just those two.

Recovery and Restructuring

Much of the reason for the improved financial figures is the way that economies are recovering after the COVID-19 pandemic. Successful vaccination programs are encouraging more people to return to work, and more spending, which has seen many of the largest banks report improved figures when compared to last year.

Also, many banks set aside large sums of money as insurance against potential bad debt. It was anticipated that many personal and business customers would have to default on loans due to the impact of Coronavirus.

HSBC set aside $700 million as contingency. However, it has started to roll back that amount now that it’s becoming clear that a large part of it won’t be needed. Overall losses during the pandemic were much lower than had been feared possible.

At the same time, HSBC is continuing its restricting plans which are aimed at saving the bank around $4.5 billion in costs by 2022. Part of this is making around 35,000 jobs redundant worldwide, with many jobs also moving to the Asian market.

The bank has announced plans to invest around $6 billion in the region, with the key target markets identified as Hong Kong, China and Singapore.

However, the bank has been accused this year of “aiding and abetting” China’s crackdown on Hong Kong by UK MPs. This was after it was revealed that the bank had frozen the accounts of Ted Hui, a politician who belongs to the Hong Kong pro-democracy party, as well as those of this family. The bank has denied wrongdoing and said that they were just following the law.

Dividend Payouts

The return to profit has coincided with the removal of the Bank of England’s limitations on dividend payments, meaning that HSBC is now able to offer payments to its shareholders.

The bank has stated that it will be paying an interim dividend of seven cents a share to its shareholders. Many banks are now offering interim payments following the Bank of England’s announcement.

Restrictions were introduced last year to protect cash reserves in case of bad debt and were first lightened back in December 2020. However, it wasn’t until last month that the restrictions were completely lifted.