HSBC shares rise as earnings rise 79%, adding momentum to London shares

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Pre-tax earnings at HSBC rose 79% in the first quarter of 2021, as a better economic outlook allowed the global banking giant to release $ 400 million in reserves it had set aside for expected credit losses. HSBC HSBA shares, + 3.25%, rose as much as 1.5% in London trading as the group said it posted $ 5.8 billion in pre-tax earnings in the first three months of 2021, while pre-tax adjusted earnings of $ 6.4 billion crushed analyst expectations of $ 4.3. billion. Revenue of $ 13 billion also easily beat the consensus forecast of $ 12.6 billion.

The strong results were helped by the write-off of $ 400 million held in reserve for potential credit losses, the bank said, reflecting an improvement in the economic outlook beginning in 2020. In the first quarter of last year, the bank took a $ 3 billion credit loss charge. “The improvement of the economic outlook, thanks to the rapid [COVID-19] The vaccine launch, aided by the crutch of government emergency support, is a welcome relief for the bank as it helps increase profits by 79%, ”said Susannah Streeter, analyst at Hargreaves Lansdown. More on Banks: Nomura and UBS Latest to Report Archegos Losses “But there doesn’t seem to be an immediate cure for the bank’s underlying ailment, the ultra-low rates that plague the banking sector,” Streeter added. “HSBC is not alone in feeling contraction in net interest margins, which tightened again slightly during the quarter, but other banks with huge investment banking arms have been able to capitalize on increased operations over the past year.” HSBC’s results added dynamism to the FTSE 100 UKX, -0.17%, the index of London’s top stocks by market capitalization, on an otherwise mixed trading day. The index was 0.25% lower. “We are in a very busy week for companies to update their earnings and list in the UK and US, which means investors are likely to reorganize their portfolios in reaction to the news,” said Russ Mold, analyst at AJ Bell. “This could result in increased trading volumes and means that markets are driven primarily this week by company fundamentals rather than politics and macroeconomics.” More on London Markets: Canadian chipmaker Alphawave targets $ 4.5 billion valuation in London IPO Stocks that made big moves Tuesday were heavily influenced by earnings-related news. BP UK Shares: BP rose nearly 2% as the oil company pledged to reward investors with a $ 500 million share buyback program after meeting debt reduction targets and tripling profits from the same period last year. The underlying net profit on a replacement cost basis, the profitability measure used by the company and observed by analysts, was $ 2.6 billion, breaking the analyst consensus of $ 1.5 billion and representing an increase of $ 791. million in the previous year. Aveva AVV, -5.09% was the biggest drop in London’s key index, with stocks falling close to 5%. The industrial software group said its CEO decided to resign after three years, and that an executive of Aveva’s largest shareholder, Schneider Electric SU, + 0.69%, will be appointed to succeed him as of May 1. For the entire year ending March 31, Aveva reported unchanged revenue growth year over year. The Whitbread WTB hotel and restaurant group, -3.99% was not far behind Aveva, with the shares falling close to 4%, after the company posted a pre-tax loss of £ 1bn ( $ 1.4 billion) for the full year through February 25. Whitbread said the loss reflected significant COVID-19 restrictions in place throughout the year in the UK and Germany. Revenues were slightly below analysts’ expectations.