HSBC Holdings PLC (LSE:HSBA) has increased its targeted return for 2023 to 12% or more, up from previous guidance of 10%, and said it will reinstate a quarterly dividend.
“This would represent our best financial performance for a decade,” said the bank’s group chief executive Noel Quinn said on a conference call this morning.
He said the bank has more liquidity, less risk, and surplus deposits, which mean it is well-positioned to benefit from higher interest rates.
“Looking forward, we can expect the current rate cycle to bring higher returns,” Quinn said.
In the first half, the bank generated a tangible return on equity of 9.9% due to the “tailwinds” of high interest rates, and revenue growth of 2% or 12% on an adjusted basis, Quinn said on the call.
HSBC said it was “reinstating quarterly dividends” from next year onwards, with a pay-out ratio of 50% for 2023 and 2024, to “reflect materially higher expected returns”.
“We will aim to restore the dividend to pre-Covid levels as soon as possible,” said Quinn.
According to its quarterly results presentation, the bank generated US$5bn of pre-tax profit in the second quarter of 2022, a 1% decline from the same part of 2021 but ahead of analysts’ estimates of around US$4bn.
HSBC UK was “one of the standout performers” during the recent quarter, said Quinn, with a 17% increase in pre-tax profit compared to the second quarter of 2021.
Quinn said the bank was able to implement “strong cost control” following a wind-down of non-strategic assets in the US and Europe, and “organic and non-organic growth” in China particularly in wealth banking.
He noted “traction” in its Asia wealth segment following the acquisition of bolt-ons such as Axa Singapore and said “normalising interest rates” gives the bank confidence in higher returns.
According to the results presentation, customer lending was up US$14bn, or 1%, compared to the previous quarter, with growth in all regions.
HSBC said it would pay a dividend per share of US$0.09 in the first half, up from US$0.02 in the first six months of 2021.
The bank’s London-listed shares were up 5.70% by 08:07.