HSBC lowers dividend and profitability ambitions after pandemic-induced annual earnings slump By Reuters

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© Reuters. The HSBC logo is seen on a bank branch in New York‘s financial district

By Alun John and Lawrence White HONG KONG / LONDON (Reuters) – HSBC Holdings (NYSE 🙂 PLC abandoned its long-term profitability target on Tuesday and released a revised strategy focused primarily on wealth management in Asia following the impact of the COVID-19. your annual profits drop dramatically. Citing the low interest rate environment and tough market conditions, HSBC dropped its long-term profitability objective of achieving a return on tangible equity of 10-12% and said it will instead aim for 10% in the medium. term. Actions by Europe’s largest bank underscored the tough outlook for the banking sector, as low interest rates around the world take their toll, even as a rebound in global markets boosted prospects for the wealth management business. . Margin pressure and mounting losses in Europe have forced HSBC to redouble its focus on Asia, which accounted for 146% of its profits in 2020, as executives seek new engines of growth. The bank said it would pay a dividend of $ 0.15 per share in cash, the first payment announced since October 2019, after the Bank of England prevented all major lenders from paying dividends or repurchasing shares in 2020 to conserve capital. However, it said it would stop the previous practice of paying a quarterly dividend and target a pay rate of between 40% and 55% of reported earnings per common share from 2022 onwards, well below the level of the last years. HSBC also said it will make significant cuts to some of its administrative functions, such as technology and operations, without specifying the number of jobs affected. The lender cut 11,000 jobs in 2020 and had signaled it would make further cuts. The announcement came as HSBC reported a 34% drop in annual profits, slightly better than expectations, after a year in which its global business was hit hard by the pandemic and reeling under much lower interest rates. . Europe’s largest bank by assets reported earnings before tax of $ 8.78 billion for 2020, down from $ 13.35 billion the previous year. The gain was above the $ 8.33 billion average of analyst estimates compiled by the bank. Shares of HSBC Hong Kong rose as much as 6% following the resumption of trading after the lunch break, extending previous gains. The benchmark index was up 1.9%. FOCUS ON ASIA, DOWN ELSEWHERE HSBC said its growth in Asia over the next five years will be driven by about $ 6 billion of additional investment in its wealth management and international wholesale business. That investment will focus on expanding the bank’s wealth management business in Greater China, as well as Asia in general. In its investment banking business, HSBC said it would rebalance capital, investment and staff from Europe and North America to Asia. Commenting on its underperforming businesses elsewhere, HSBC said it is in talks with a potential buyer for its troubled retail banking unit in France, which it has been trying to divest for more than a year, but no confirmation has been made. agreement. He said he expected to take a loss on the sale given the underlying performance of the company. The bank also said it is “exploring organic and inorganic options” for its US retail banking franchise, suggesting it is trying to sell the unit where it already closed 80 branches last year. Reuters and others have reported that the bank is attempting to withdraw from US retail banking.