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(Alliance News) - HSBC Holdings PLC on Tuesday reported a sharp jump in profit in 2021, with all of the bank's regions recording a positive year but was unable to match market expectations, and the bank unveiled a new bumper USD1 billion share buyback programme.
"HSBC delivered a good financial performance in 2021. All of our regions were profitable in 2021, supported by the global economic recovery, demonstrating the value of our global network. There was also good growth in focus areas such as Asia wealth and trade," Chair Mark Tucker said.
In 2021, London-headquartered HSBC reported pretax profit of USD18.91 billion, doubled from USD8.78 billion in 2020 - but coming in behind market forecasts of USD19.12 billion.
Driving profits higher was the reversal of the bank's expected credit losses, which was a USD928 million gain in 2021 compared to a USD8.82 billion charge in 2020 as the lender set aside huge sums to handle the fallout from the Covid pandemic.
Annual revenue slipped to USD49.55 billion from USD50.43 billion. HSBC's net interest margin in 2021 worsened to 1.20% from 1.32% in 2020 - which was in line with market forecasts.
Net interest income fell to USD26.49 billion from USD27.58 billion, but was able to be slightly ahead of consensus of USD26.35 billion. Net fee income was up to USD13.10 billion from USD11.87 billion. Finally, net insurance premium income rose to USD10.87 billion from USD10.09 billion.
As a result, net operating income was up to USD50.48 billion from USD41.61 billion, beating market expectations of USD49.61 billion.
Chief Executive Noel Quinn said: "The global economic recovery supported our 2021 financial performance, as the release of expected credit losses resulted in an improvement in the profitability of the group and all global businesses.
"Our interest-rate sensitive business lines continued to be adversely impacted by low interest rates, but our net interest margin remained broadly stable during 2021 and the outlook is now significantly more positive. After absorbing the impact of low interest rates for some time, we believe we have turned the corner on revenue. We have also seen good fee income growth, good growth in mortgage balances and our lending pipelines across both retail and wholesale remain strong. Our insurance business also continues to perform well, notably in Asia where we have seen strong growth in value of new business, despite the border between Hong Kong and mainland China remaining closed."
Regionally, HSBC reported pretax profit of USD12.25 billion in Asia in 2021, down from USD12.83 billion in 2020. This was more than offset, however, by its European operations swinging to a USD3.78 billion profit from a USD4.21 billion loss in 2020. In North America, profit improved sharply to USD1.37 billion from USD168 million, while in the Middle East & North Africa, profit was up significantly to USD1.42 billion from USD19 million and Latin America recorded USD81 million in profit versus a USD37 million loss in 2020.
The bank ended 2021 with a CET1 ratio of 15.8% versus 15.9% at the same point the year prior.
"Our strong capital position and confidence in the business enabled us to announce a share buy back of up to USD2 billion in October 2021. We also intend to initiate a further share buy-back of up to USD1 billion, to commence after the existing buy-back of up to USD2bn has concluded," Quinn added.
HSBC declared an annual dividend of USD0.25, up from USD0.15 in 2020.
The bank's loan book stood at USD1.046 trillion at the end of 2021, up from USD1.038 trillion 12 months earlier. Customer accounts rose to USD1.711 trillion from USD1.643 trillion.
Looking ahead, Quinn said: "We carry good business momentum into 2022 in most areas and expect mid-single-digit lending growth over the year. However, we expect a weaker Wealth performance in Asia in the first quarter of 2022.
"Our net interest income outlook is now significantly more positive. If policy rates were to follow the current implied market consensus, we would expect to deliver a return on tangible equity of at least 10% for 2023, one year ahead of our previous expectations."
For 2021, HSBC's RoTE was 8.3% versus 3.1% in 2020.
HSBC was trading 2.4% lower in Hong Kong on Tuesday at HKD57.15, having ended 0.4% higher in London on Monday at 546.80 pence.
By Paul McGowan; paulmcgowan@alliancenews.com
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