Half year results: HSBC earnings per share came above expectations at $0.41, reported revenue down 1%
HSBC, one of the largest banking and financial services institutions in the world, reported the first half of the year’s financial performance and announced dividend payout ratio guidance of around 50% for 2023 and 2024.
Financial performance (1H22 vs 1H21)
• Reported profit after tax increased by $0.8bn to $9.2bn (+9% yoy), including a $1.8bn gain on the recognition of a deferred tax asset from historical losses, as a result of improved profit forecasts for the UK tax group, which has accelerated the expected utilisation of these losses. Reported profit before tax decreased by $1.7bn to $9.2bn, reflecting a net charge for expected credit losses, compared with a net release in 1H21. Adjusted profit before tax fell by $0.9bn to $10.7bn.
• Reported revenue decreased marginally to $25.2bn, primarily due to foreign currency translation impacts and 1H22 losses on planned business disposals. Adjusted revenue increased by 4% to $25.7bn, driven by higher net interest income, reflecting interest rate rises and balance sheet growth, and strong growth in revenue from Global Foreign Exchange in Global Banking and Markets.
This was partly offset by unfavourable market impacts in insurance manufacturing in Wealth and Personal Banking.
• Reported expected credit losses were a net charge of $1.1bn, reflecting charges of $0.8bn, as well as additional allowances to reflect
heightened economic uncertainty and inflation, in part offset by the release of most Covid-19 reserves. This compared with a $0.7bn net release in 1H21.
• Reported operating expenses decreased by 4%, primarily due to foreign currency translation impacts. The reduction also reflected the impact of our cost-saving initiatives and a lower performance-related pay accrual, which partly offset increased investment and inflationary impacts.
• Return on average tangible equity (‘RoTE‘) (annualised) of 9.9% increased by 0.5 percentage points compared with 1H21, including a 2.3 percentage point annualised impact of the deferred tax asset gain.
• Common equity tier 1 (‘CET1’) ratio of 13.6% decreased by 2.2 percentage points from 31 December 2021. This reflected a reduction in CET1 capital of $16.8bn, which included a $4.8bn valuation loss in equity from financial instruments as yield curves steepened, and a $13.4bn increase in risk-weighted assets (‘RWAs’) primarily from 1Q22 regulatory changes. The reduction also included the share buy-back of up to $1bn announced at our full-year 2021 results.
• The Board has approved an interim dividend for 1H22 of $0.09 per ordinary share, to be paid in cash.
Outlook for 2022
• The revenue outlook remains positive. Based on the current market consensus for global central bank rates and continued mid-singledigit percentage lending growth expectations for 2022, HSBC expects net interest income of at least $31bn for 2022 and at
least $37bn for 2023.
• The Bank continues to expect credit losses charges to normalise towards 30bps of average loans in 2022, recognising the possible risk of
further deterioration in the consensus economic outlook.
HSBC expects a dividend payout ratio of around 50% for 2023 and 2024.