HSBC Holdings Plc, the London-headquartered bank, has announced a fresh plan to return money to shareholders following its first-quarter results that exceeded estimates. The bank will buy back up to $2 billion of stock and resume paying quarterly dividends for the first time since 2019. The move aims to step up capital returns and boost profitability as the bank faces mounting pressure from one of its largest investors. HSBC's pre-tax profit tripled to $12.89 billion, beating the estimate of $8.64 billion, partially driven by a $2.1 billion reversal of an impairment linked to the delayed sale of its French retail arm and the booking of a $1.5 billion gain from its purchase of Silicon Valley Bank's UK business.
The bank's pivot to Asia and its focus on shedding unprofitable businesses in North America and Europe have resulted in an 82% increase in wealth and personal banking revenue for the quarter, while commercial banking income doubled. Moreover, like its Wall Street and European peers, HSBC has seen a recovery in earnings on the back of higher interest rates. As the biggest bank in Hong Kong, the lender is also expected to benefit from increased wealth flows after China dropped its strict pursuit of Covid zero.
HSBC has maintained its guidance for net interest income of at least $34 billion this year, despite expectations of continued pressure from increased migration to term deposits as interest rates rise. The bank also reported a credit impairment charge of $432 million, a common equity tier 1 ratio of 14.7%, and customer deposits were stable at $1.6 trillion.
HSBC's earnings in the first quarter have come at a crucial time for the bank as its directors prepare to face investors at the bank's annual meeting. Two investor-proposed resolutions are on the agenda for the AGM, which would force the bank to report regularly on its Asian business and require it to lift its dividend to its pre-pandemic level. The bank's board has recommended that shareholders vote against the resolutions.
In recent months, HSBC and its top shareholder, Ping An Insurance Group Co., have fought an increasingly fraught battle over the bank's future. The Chinese insurer has repeatedly called for the company to consider a spin-off of its Asian unit, which HSBC has dismissed as expensive, risky, and likely to destroy shareholder value. The bank said last month that it had held about 20 high-level meetings with Ping An in the past year to discuss the proposals but that it remained unconvinced by its arguments.
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