LONDON (CU)_HSBC on Tuesday (Feb 23) announced a dividend payout for the first time since the COVID-19 pandemic, despite a 34 per cent drop in profit.
According to the bank’s full-year earnings for 2020, profit before tax was down from $13.3bn (£9.4bn) in 2019 to $8.8bn in the 12 months to 31 December. However, this beat analyst expectations of $8.33 billion, estimates compiled by HSBC revealed.
Noel Quinn, HSBC’s group chief executive, said in a statement that the COVID-19 pandemic inevitably affected the bank’s performance, especially owing to credit losses and cuts in central bank interest rates.
“The pandemic inevitably affected our 2020 financial performance,” he said. “The shutdown of much of the global economy in the first half of the year caused a large rise in expected credit losses, and cuts in central bank interest rates reduced revenue in rate-sensitive business lines.”
The CEO further noted that while HSBC’s board has announced an interim dividend of 15 cents per share, however, the bank has a new policy on dividends in order to balance offering income to investors and investing in HSBC’s growth over the medium term.
“We will consider share buy-backs, over time and not in the near term, where no immediate opportunity for capital redeployment exists. We will also no longer offer a scrip dividend option, and will pay dividends entirely in cash,” he said.
Moreover, it is reported that the bank will not be paying quarterly dividends this year, but will consider an interim payout in August when its half-year results are to be issued.
Last year, after the Bank of England urged lenders to conserve capital, HSBC halted its dividend payments. However, later in December, the British regulator said that banks can resume paying dividends, following which, Barclays bank, one of the prominent multinational banks in the country, resumed such payouts, and launched a £700 million ($985.4 million) share buyback.
