© Reuters. FILE PHOTO: HSBC bank logo appears in New York
By Lawrence White LONDON (Reuters) – HSBC Holdings (NYSE 🙂 PLC reported a significantly better-than-expected 79% increase in first-quarter earnings on Tuesday as a better economic outlook allowed the bank to free up cash set aside for bad loans. because of the coronavirus pandemic. Europe’s largest bank by assets posted pre-tax earnings of $ 5.78 billion for the three months ended March 30, up from $ 3.21 billion a year ago and well above the average forecast. from analysts of $ 3.35 billion compiled by the bank. The bank released $ 400 million in bad debt provisions, which it said “reflected an improvement in the economic outlook, especially in the UK.” HSBC had set aside an additional $ 3 billion a year earlier when the impact of the pandemic began to hit. HSBC, which makes most of its profits in Asia, said its credit losses for 2021 are likely to be below the mid-term range of 30 to 40 basis points it forecast in February. Still, the improved outlook and earnings paled compared to US rival JPMorgan (NYSE :), which earlier this month reported a 400% increase in quarterly earnings and released more than $ 5 billion in loan provisions. bad debts. HSBC’s fortunes are strongly tied to global interest rates. Revenues fell 5% in the quarter from a year earlier as low interest rates in its main markets limited the bank’s ability to generate large income from loans. Hibor, the benchmark interest rate in HSBC’s most profitable market in Kong Kong, was near 10-year lows for much of the quarter. HSBC announced in February a revised strategy to focus primarily on wealth management in Asia, with the goal of earning more fee income from clients rather than the difference between the interest rates the bank offers to savers and charges to borrowers. HSBC said Tuesday that it was continuing negotiations for the sale of its retail banking business in France, but no final decision has been made. Reuters reported last month that HSBC had started final negotiations to sell the business, which has 270 branches, to private equity firm Cerberus. HSBC is the first of the big British banks to announce first quarter earnings. Lloyds Banking Group (LON 🙂 is due to report on Wednesday, Standard Chartered (OTC 🙂 and NatWest Group on Thursday, and Barclays (LON 🙂 on Friday.