HSBC responds to Ping An pressure with dividend boost

HSBC raised its dividend to the highest level in four years and said it may hand out a further special payout next year, as it seeks to fend off break-up calls from its largest shareholder Ping An.

The UK- and Hong Kong-listed bank also said it would consider share buybacks sooner than expected. The moves came as it reported quarterly pre-tax profits rose to $5.2bn, surpassing expectations, as higher interest rates boosted revenues.

HSBC’s push to please its shareholders comes as it faces pressure from Ping An, a Chinese insurance group which owns just over 8 per cent of the bank’s shares and is lobbying for a split of its Asian and western operations.

It began publicly agitating for change after HSBC halted its dividend in the early days of the Covid-19 pandemic in 2020, angering shareholders, and then handed out smaller dividends in 2021.

“We are on track to deliver higher returns in 2023 and have built a platform for further value creation,” chief executive Noel Quinn said.

“It has been, and remains, our judgment that alternative structural options would not deliver increased value for shareholders. Rather, they would have a material negative impact on value,” he added, in a reference to Ping An’s split proposal.

The bank approved total dividends of 32 cents per share for 2022, the highest level since 2018, and said next year’s special dividend would be a “priority use of the proceeds” from the sale of its Canadian business. In November, it agreed to sell the division to Royal Bank of Canada for $10bn. On Tuesday, HSBC said it expected to complete the sale of its Russian business, as well as its businesses in Greece and France, this year.

Still, the bank took $1.4bn in credit losses and impairment charges for the final three months of the year, up from $500mn a year earlier, including from bad loans to UK companies and exposure to mainland China’s troubled commercial real estate sector.

The bank added another $600mn to its reserves for potential China commercial real estate losses, taking its total for the year to $1.3bn. It still has $16.8bn of exposure to the sector.

Its pre-tax profit for the full year fell by $1.4bn, partly because of an impairment on the planned sale of its retail banking operations in France. The bank cut its bonus pool by almost 4 per cent to $3.4bn.

HSBC’s Hong Kong-listed shares briefly rose on Tuesday following the announcement but fell to be down 1.5 per cent.

Net interest income rose to $32.6bn for the full year, up from $26bn in 2021, a sign of how far rising interest rates have helped boost banks’ profits. HSBC, one of the world’s largest deposit-taking institutions, is particularly sensitive to changes in rates.

As tensions grow between China and the west, HSBC has had to answer continued questions about its ability to keep operating as a global lender straddling east and west, with bases in London and Hong Kong. Tensions ratcheted up this month when the US shot down a suspected Chinese spy balloon.

While the bank has rejected Ping An’s demands to split the business, it is shifting its operations to focus more closely on Asia, which made up 78 per cent of its adjusted pre-tax profits in 2022.

Two years ago, HSBC said it would accelerate its “pivot to Asia”, investing to expand in Hong Kong, China and Singapore while selling off some western operations and relocating senior managers to Hong Kong.

The bank’s common equity tier one ratio, a measure of balance sheet strength, fell by 1.6 percentage points from a year ago to 14.2 per cent, just above the 14 per cent floor of the bank’s medium-term target range.