Last checked at 
* HSBC Q1 profit before tax $5.78 bln vs forecast $3.35 bln
* Bank releases $400 mln of provisions on improved outlook
* Unlikely to repeat level of writebacks through 2021 - CFO
* No plans to move HQ from London - CEO
(Adds details, updates shares)
By Lawrence White
LONDON, April 27 (Reuters) - HSBC Holdings PLC beat
quarterly profit forecasts and released $400 million it had set
aside to cover bad loans caused by the pandemic, as rapid
vaccine rollouts in the United States and Britain raise hopes
for an economic recovery.
Europe's biggest bank by assets cautioned, however, that
high levels of uncertainty meant it was keeping the bulk of the
$3 billion it set aside a year ago to cover potential bad debts.
"We are still being relatively cautious, and we've retained
about 70% of the reserve build up we did last year," Chief
Financial Officer Ewen Stevenson told Reuters.
HSBC reported on Tuesday profit before tax of $5.78 billion
for the three months to March 30, up from $3.21 billion a year
ago and well above analysts' average forecast of $3.35 billion
as compiled by the bank.
However, this compared with $6.21 billion in the same period
in 2019, showing the lender has some way to go to get back to
pre-pandemic profit levels.
HSBC, which makes the bulk of its profits in Asia, said its
credit losses for 2021 were likely to be below the medium-term
range of 30-40 basis points it forecast in February.
Despite a plan to shift more business to Asia, Chief
Executive Noel Quinn said the lender had no immediate plans to
move its headquarters from Britain to the region.
London is still "a good place for the head office of an
international bank," Quinn told reporters.
HSBC shares rose 1.7 % in London, the best performers in the
benchmark FTSE index and reflecting earlier gains in its
Hong Kong-listed shares.
"We are more optimistic than we were back in February, we
expect GDP to rebound in every economy in which we operate this
year," Quinn told Reuters, citing the successful rollout of
vaccines in the United States and Britain as a key factor.
RATES SQUEEZE
HSBC's improved outlook and profits paled in comparison to
U.S. rival JPMorgan, which earlier this month reported a
400% increase in quarterly profit and released more than $5
billion in bad loan provisions.
That partly reflected the European lender's heavy reliance
on global interest rates to make money, which it said in
February it would try to address by shifting to more fee-based
business, such as wealth management.
Hibor, the benchmark lending rate in HSBC's most profitable
market of Hong Kong, was near 10-year lows for much of the
quarter, and the lender's revenue overall fell 5% as such low
rates compressed income from lending.
"HSBC is not alone in feeling the squeeze of net interest
margins, which tightened again slightly over the quarter, but
other banks with huge investment banking arms have been able to
capitalise on the trading surge over the past year," said
Susannah Streeter, analyst at online investment platform
Hargreaves Lansdown.
While HSBC lagged U.S. peers in its performance, it at least
avoided losses from the collapse of U.S. investment fund
Archegos that blighted European rival UBS's results.
HSBC had no direct or indirect exposure to Archegos, Quinn
told reporters.
HSBC also said it was continuing negotiations for the sale
of its French retail banking business, but no final decision had
been taken. Reuters reported last month that HSBC had entered
negotiations to sell the business, which has 270 branches, to
private equity firm Cerberus.
The lender likewise had no update on progress to dispose of
its similarly underperforming U.S. retail banking business.
(Reporting by Lawrence White. Editing by Emelia
Sithole-Matarise and Mark Potter)
