HSBC profit rose sharply in 2021 as credit impairment charges were released and the bank’s Asian operations was higher levels of profitability.
HSBC released 2021 profit after tax that rose $8.6bn to $14.7bn, and reported profit before tax up $10.1bn to $18.9bn.
The main element in HSBC’s jump in profit was a dramatic shift in provision in bad debts in 2020 that started to slowly be reversed in 2021. HSBC’s impact of impairment charges in 2021 was a net release of $0.9bn, compared with an $8.8bn charge in 2020.
HSBC, along with other UK banks, were forced to put aside huge sums in 2020 in preparation for a wave of bad debts due to COVID-19. However, the impact of government support for economies meant the worst case scenarios were avoided and allowed for reversals in 2021.
Although HSBC’s profit rose sharply, their revenue fell 2% to $49.6bn as lower global interest rates hit Net Interest Margins. HSBC’s Net Interest Margin fell 1.2% in 2021.
HSBC’s Asia operations were a significant contributor to profit, providing $12.2bn reported profit before tax. Asian wealth and trade markets have been an area of focus for HSBC.
HSBC UK bounced back with profit before tax increasing by $4.5bn to $4.8bn.
Their strong resurgence in profitability has provided the bank with confidence to announce a $1bn share buyback, although some market participants were expecting more.
HSBC declared an interim dividend of $0.18 per share, making a total for 2021 of $0.25 per share.
“We made good progress against our strategy in 2021, which contributed to a strong financial performance that was supported by the global economic recovery. All of our regions were profitable and we saw growth in the fourth quarter of 2021 in many of our business lines,” said Noel Quinn, Group Chief Executive.
“We have good momentum coming into 2022 and are confident that we can continue to execute against our strategy. We also remain cognisant of the potential impact that further Covid-19-related uncertainty and continued inflation might have on us and our clients.”
HSBC shares fell 3% on the news, albeit in a market rocked by news of Russian troops entering Ukraine.
