HSBC flags bigger investments in Asia after profit beat

HSBC Holdings Plc’s earnings beat estimates in the fourth quarter as the lender kept costs in check and signaled bigger investments to drive its pivot to faster-growing Asian markets.

Weighed down by loan losses, adjusted pretax profit slid 50% to US$2.2 billion ($2.91 billion) in the period, compared with a US$1.80 billion estimate, the London-based bank said Tuesday. HSBC will resume paying a dividend of $0.15 after British regulators relaxed a ban intended to preserve capital last year after the virus outbreak.

HSBC rose 4.6% to HK$48.65 as of 1:02 p.m. in Hong Kong.

Chief Executive Officer Noel Quinn said in a statement that the bank had a “solid financial performance in the context of the pandemic – particularly in Asia,” which lays “firm foundations for our future growth.”

Sticking to cost cutting plans that will reduce its workforce by about 35,000, HSBC is pushing through one of the banking industry’s most radical responses to the pandemic. Europe’s largest bank is shifting billions of dollars to beef up operations across Asia, seeking to become a market leader in wealth management by targeting a rapidly expanding affluent population in the region.

The bank on Tuesday outlined plans to invest about $6 billion in Asia, targeting wealth, commercial banking and markets to drive “double-digit growth in profit.” It singled out markets in southeast Asia such as Singapore, as well as China and Hong Kong.

Expected credit losses last year hit $8.8 billion, as expected at the low end of a previously announced range of $8 billion to $13 billion. It now expects them to be materially lower this year.

The bank stuck to a target of getting its cost base down to $31 billion or less in 2022 as well as a $100 billion reduction in gross risk-weighted assets. It doesn’t expect to reach a return on average tangible equity target of between 10% and 12% in 2022, but will now target a return of 10% or above in the medium term.

The focus on other markets in Asia outside Hong and China involves more than economics. China’s crackdown on Hong Kong has increasingly forced HSBC to accept criticism in the U.S. and U.K. as a cost of doing business. Quinn was summoned to testify to British lawmakers this month over the lender’s decision to close the accounts of an exiled Hong Kong democracy activist.

The bank divulged little news on its plans for Europe and the US.

HSBC said it’s in talks on selling its French retail bank and is likely to post a loss on any divestment. It’s exploring “strategic options” for its US retail franchise and wants to focus on high-net worth clients. HSBC has one of the largest U.S. businesses of any non-American bank, partly a result of its ill-fated acquisition of Household International in 2003, the subprime lender that ended up costing the company billions of dollars in writedowns.