HSBC increases cash returns to olive branch investors

As it seeks to satisfy investors unhappy with its stock market performance, HSBC has laid out plans to increase cash returns for shareholders.

In its annual results, the FTSE 100-listed bank revealed that it aimed at paying a special dividend in 21 cents per share after the sale of its Canadian business for $10 billion is completed later in this year.

It also stated it would pay an interim dividend of 23c per share for 2022. This would bring its total payout for 2018 to 32cs. The company also indicated it would be considering further share buybacks.

It revealed the impressive returns and full-year results, which showed that its annual pretax profits fell to $17.5 Billion from $18.9 Billion a year earlier. This was aided by a $2.4B impairment on its French retail operations.

Although its fourth quarter profits rose to $5.2 billion more than anticipated, the company also recorded a $1.4billion charge for bad loans in the three-month period. This was higher than the $1.1billion forecast by analysts.

Although HSBC has its headquarters in London, and is a prominent presence on British high street, most of its funds are made in Asia, where its roots lie. It was established in Hong Kong in 1865. The former British colony is still its largest market.

Noel Quinn is the chief executive of the group and has been under pressure from investors to do a more drastic restructuring.

Ping An is a Chinese insurer and the largest shareholder of HSBC. The bank has been asked to split its Asian division into a separate listed company in Hong Kong.

Quinn and other members of the HSBC board opposed the proposal because it would destroy value. However, Ping An has gained some support from retail investors in Hong Kong that hold shares in the bank.

Many small shareholders see the dividends from HSBC as a reliable source for income. They were upset in 2020 when British regulators forced the bank to cancel dividend payments during Covid.

Quinn pledged to increase shareholder returns through the sale of Canada’s Canadian arm, which was reached in November. HSBC stated Tuesday that the special dividend it planned was a priority use of proceeds from the deal.

Quinn stated that “We are on track for higher returns in 2023” and had created a platform to further value creation. We will be able to distribute more money with the higher returns. Once HSBC Canada has been sold, we will consider a special dividend.

It stated that it had also brought forward the consideration for share buybacks as another method of returning capital to its first quarter results in May. The company will consider additional buybacks with any excess capital from Canada disposal.

HSBC announced that quarterly dividend payments, which were suspended after the pandemic in 2009, will be resumed starting the first quarter this year. It had announced last year that quarterly dividend payments would be reintroduced.

HSBC revealed that its bankers’ bonus pool fell by 4 percent to $3.36 Billion. Quinn was paid approximately PS5.6 million last year, but this could increase to PS9.8 millions if long-term shares are included.

HSBC shares fell 6p or 0.9 percent to 614 1/2 p during early morning trading.