SINGAPORE - HSBC reported a 15% dip in first-half profit as credit loss provisions rose, but the fall was not as bad as feared and Europe's biggest bank lifted its returns guidance in the belief that rising interest rates will boost revenue.
In a sign of growing confidence in its ability to improve profitability despite the global economic uncertainty, HSBC raised its near-term return on tangible equity goal to at least 12% from 2023 onwards.
The London-headquartered lender reported on Monday a pretax profit of $9.2 billion for the six months ending June 30, down from $10.84 billion a year ago but beating the $8.15 billion average estimate of analysts compiled by the bank.
The bank said it would pay an interim dividend of 9 cents per share and that it intends to revert to paying quarterly dividends from the start of 2023. It also said share buybacks remain unlikely this year.
"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," Chief Executive Noel Quinn, who has been running HSBC for more than two years, said.
Hong Kong-listed shares of HSBC reversed early losses and rose more than 2.5% in afternoon trade on Monday.
HSBC said Asia's share of profit went up to 69% in the first half from 64% a year ago.
The bank has come under pressure from its largest shareholder, Ping An Insurance Group Co of China Ltd , to explore strategic options such as spinning off its mainstay Asian business to unlock greater shareholder value.
Since then, the proposal has won support from some retail investors in Hong Kong who were disgruntled with dual-listed HSBC's decision to cancel its dividend payment in 2020.
A Hong Kong politician has urged HSBC to spin off its Asia business and appoint representatives of Ping An to its board, as the global lender prepares to meet with Hong Kong shareholders on Tuesday.
The bank said it is accelerating the restructuring of its U.S. and European businesses, and will rely on its global network to continue to drive profits, in an implied rebuttal to Ping An.
Reuters reported last month the bank would push back on Ping An's proposals.
"Our strength as a well connected, global institution is the main reason our wholesale clients choose to bank with us and we are determined to capitalise on the advantages our network gives us," Quinn said in the earnings release.
HSBC reported a $1.1 billion charge for expected credit losses, as heightened economic uncertainty and rising inflation put more of its borrowers into difficulties.
(Reporting by Anshuman Daga and Lawrence White; Editing by Muralikumar Anantharaman)