Banking giant HSBC has vowed to return dividend payments to shareholders to pre-pandemic levels “as soon as possible” as it comes under pressure from its biggest investor to break up the group.
Chief executive Noel Quinn made the pledge as he seeks to fend off talks from China’s Ping An Insurance Group – which owns around 9.2% of HSBC’s shares – to spin off its burgeoning Asian arm from the UK business.
The group reported a 15%, or US$1.7bn (£1.4bn), fall in pre-tax profit in the first half to US$9.2bn (£7.5bn) for the six months to June 30, as it joined rivals in setting aside cash to cover potential loan losses, ordering a fee of US$1.1bn (£902m).
It said this partly reflected “increased economic uncertainty and inflation” as rising cost pressures hit the UK and global economy.
But the result for the second quarter was better than expected, and the group promised that it will return to paying a quarterly dividend next year.
Mr Quinn said: “We understand and appreciate the importance of dividends to all our shareholders.
“We will aim to restore the dividend to pre-Covid-19 levels as soon as possible.
“We also intend to return to quarterly dividends in 2023.”
Dividends at HSBC were one of the main reasons Ping An has been pushing for a break-up, after the Bank of England banned UK lenders from paying out dividends in the early stages of the pandemic to ensure the sector was resilient.
That cut was lifted last July, but Ping An has argued that Asian investors felt cheated out of the dividend.
HSBC is based in London and has a large presence in the UK market, but makes most of its profits in Asia.
The bank’s board will meet private investors in Hong Kong on Tuesday in what promises to be a tense gathering.
A Hong Kong politician, Christine Fong, has also backed calls for HSBC’s Asian operations to be spun off and wants representatives of Ping An to be appointed to the bank’s board.
But Mr Quinn said in the group’s half-year results that its “internationalism remains the most defining feature of our identity”.
He added: “Serving customers across borders is what we do best. That’s how we can best help them grow and, we believe, the fastest way to accelerate returns for our shareholders.
The group said it is two-and-a-half years into an overhaul and has cut costs worldwide, but has “more to do before December – particularly to further simplify the organisation”.
“I remain committed to achieving stable adjusted costs in 2022 compared to last year, despite rising inflation,” Quinn said.
This gives activist shareholders even more leverage to push businesses to find new, potentially radical, ways to drive growth
Sophie Lund-Yates, Hargreaves Lansdown
Alongside the dividend pledge, it also increased its interim shareholder payout to nine cents per share, compared with seven cents per share a year ago, but down from 18 cents in the second half.
Shares in HSBC rose 6% after the figures.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said there were some “warning signs” in HSBC’s results, given the large charge it ordered.
She said: “It more than undoes the helping hand from rising interest rates on the bottom line.
“This gives activist shareholders even more leverage to push businesses to find new, potentially radical, ways to drive growth.”