HONG KONG — HSBC Holdings’ first-quarter profits soared as recovery from the coronavirus pandemic picked up pace and the bank clawed back funds set aside for bad debts.
The U.K.-headquartered bank, which is pivoting to Asia in a bid to move past years of underperformance in other regions, said on Tuesday that first-quarter adjusted profit before tax rose 109% to $6.4 billion. The consensus estimate by analysts was $4.3 billion, as compiled by HSBC.
Net profit climbed to $4.57 billion from $2.51 billion a year earlier, with both the U.S. and U.K. rebounding from previous losses.
The strong gains came as the bank reclaimed funds previously allocated for potentially souring loans, rather than adding to its provisions, thanks to the improving economic outlook which Chief Executive Noel Quinn said would boost revenue, with lending seen rising in the “mid-single digit percentage” in 2021.
“The economic outlook has improved, although uncertainties remain,” Quinn said in a statement. “We carry good momentum into the second quarter, while maintaining conservative positions on capital, funding, liquidity and credit.”
HSBC, which earmarked $8.8 billion on its books for bad debts last year, reversed $435 million of bad loan allowances in the first quarter, as corporate and retail customers proved more resilient than expected.
In February, Quinn advanced a plan to invest in higher return, fee-generating the operations, especially in Asia. The bank plans to put allocate half of its capital — the underpinning for its lending — to activities in the region.
The bank is also looking to get more profits from fee-generating businesses and plans to invest an extra $6 billion in wealth management and international wholesale banking to drive “double-digit” growth in the region.
In the first quarter, wealth balances increased by 3% to over $1.6 trillion. This included net new money in global private banking of $13 billion and in asset management of $11 billion.
The bank is also relocating the heads of all its main revenue generating divisions to Hong Kong from London.
This month, Quinn said in an internal memo that Greg Guyett, co-head of global banking and markets, Nuno Matos, chief executive of wealth and personal banking, Barry O’Byrne, chief executive of global commercial banking and Nicolas Moreau, head of asset management, would relocate in the second half of the year.
The changes are part of the latest overhaul of the bank, which has 226,000 staff and operations in 60 countries. HSBC is focusing on China, Hong Kong, Southeast Asia and India for growth.
HSBC in the statement said it continues to make progress on its overhaul plan and will provide an update in August.
HSBC reiterated it is exploring “organic and inorganic options” for its U.S. retail network. It had previously said it would continue to focus on its wealth-management platforms in the world’s largest economy.
A sale of its 150-branch U.S. business would end a 40-year attempt to run a full-service bank in America.
HSBC shares in Hong Kong, which tumbled to a 25-year low in September, have climbed 11% this year. The shares closed the morning session on Tuesday 0.3% higher.
