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HSBC (HSBA.L) beat earnings estimates for the second quarter and vowed to reinstate quarterly dividends payments as it fights pressure from its biggest shareholder to split its western and Asian operations.
The bank said it will restore dividends to pre-pandemic levels, a key measure to satisfy demands from its Hong Kong investor retail base, and start paying quarterly dividends from the start of 2023.
HSBC said it will pay an interim dividend of 9 cents a share, but that share buybacks remain unlikely this year as it warned of a drop in its core capital ratio due to regulatory changes and a hit on its interest rate hedge.
"We understand and appreciate the importance of dividends to all of our shareholders. We will aim to restore the dividend to pre-COVID-19 levels as soon as possible," Quinn added.
The FTSE 100 (^FTSE) lender delivered a pretax profit of $9.2bn (£7.6bn) for the six months ending 30 June, down from $10.8bn a year ago. It beat a consensus of £8.2bn.
Europe's largest bank said the 15% drop in pretax profits reflected a net charge of $1.1bn for expected credit losses and credit impairments as a result of heightened economic uncertainty and inflation.
Profits before tax reached $5bn in the second quarter, up on the $3.9bn estimates but falling slightly short of the $5.1bn recorded a year earlier.
Adjusted pretax profits rose 13% to $5.97bn in Q2, driven by increases in commercial banking and markets, the bank said on Monday. It expects net income to reach £37bn next year.
HSBC posted revenues in line with expectations of $12.8bn in the second quarter, and about 2% higher than the same period last year.
Revenues were $25.2bn in the first half, marginally lower than in 2021 due to planned business disposals and foreign currency impacts, according to HSBC.
The bank said it held talks with Ping An (PNGAY) and pushed back on its calls for a break up.
Chief executive Neil Quinn said on a call with media on Monday that a demerger or spinoff of its Asian arm risks huge execution costs, higher taxes and ongoing running costs for the bank.
Shares in London jumped as much as 7.5%, while the Hong kong listed shares of HSBC (0005.HK) gained 5% after the closing bell.
However, despite global economic uncertainty, the London-based lender raised its near-term profitability goal to at least 12% from next year onwards.
"The progress that we’ve made growing and transforming HSBC means we are in a strong position as we enter the current rates cycle," Quinn said in a statement.
"We are confident of achieving a return on tangible equity of at least 12% from 2023 onwards, which would represent our best returns in a decade."
Since reports emerged in April, HSBC has been facing mounting pressure to bow to the demands of its biggest shareholder Ping An to split the businesses, which owns around 9.2% of the lender's shares.
Although based in London, HSBC makes most of its money in Asia and about a third of its shares are owned by private investors in Hong Kong.
In 2020, many of these small shareholders were angered when the Bank of England temporarily banned big British lenders from paying dividends during the pandemic as part of emergency measures to improve the resilience of the sector. It lifted the ban in July 2021.
Russ Mould, investment director at AJ Bell, said: "As it looks to resist the pressure for a split the company is hoping to win shareholders over with a pledge to pay quarterly dividends again from next year, as well as boosting its profitability goals.
"The dividend pledge is important as many of its Hong Kong shareholders, under its existing dual-listed arrangement, were mightily unimpressed with the suspension of dividend payments during the pandemic.
"However, this is unlikely to do enough to satisfy Ping An’s appetite for major structural change and this battle of wills is likely to continue for the time being at least."
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