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HSBC flags conservative return to dividends on profit beat

People wearing protective masks walk past a HSBC Holdings Plc logo at the bank’s headquarters building in Hong Kong, China on Oct 22, 2020. (CHAN LONG HEI / BLOOMBERG)

HSBC Holdings Plc signaled it may resume limited dividend payments for this year as British lenders press the Bank of England to lift a ban on payouts.

The bank is considering whether to pay a “conservative dividend” for 2020 if circumstances allow, according to its third-quarter earnings statement on Tuesday. Standard Chartered Plc Chairman Jose Vinals and Howard Davies, chairman of NatWest Group Plc, both appeared on Bloomberg Television this month to argue against the regulatory restrictions. Jes Staley of Barclays Plc has also stressed the importance of banks’ ability to return excess capital.

HSBC is considering whether to pay a “conservative dividend” for 2020 if circumstances allow, according to its third-quarter earnings statement on Tuesday 

HSBC shares jumped as much as 5.3 percent in Hong Kong.

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Europe’s biggest bank faces challenges on several fronts, including loan losses from the pandemic, falling interest rates and political tension in Hong Kong, its largest market. The bank plans to accelerate its cost savings plan and is in the midst of a full-scale reorganization, cutting 35,000 jobs and pivoting its business away from Europe and the US to China and South Asia to boost its profitability.

The tentative step to paying dividends again comes as HSBC pared back its expected loans losses for this year and posted higher profits than estimated. The bank expects credit losses to be at the lower end of a previously announced US$8 billion to US$13 billion range. Adjusted pretax profit slid 21 percent to US$4.3 billion in the period, beating the US$2.8 billion estimate.

“These were promising results against a backdrop of the continuing impacts of COVID-19 on the global economy,” Chief Executive Officer Noel Quinn said in a statement. “I’m pleased with the significantly lower credit losses in the quarter, and we are moving at pace to adapt our business model to a protracted low interest rate environment.”

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The bank’s shares hit a 25-year-low in Hong Kong last month, in part amid concerns over its expansion in China and after scrapping its dividend earlier this year at the behest of UK regulators.

HSBC expects to cut costs deeper than previously, aiming to reduce the annual cost base beyond a US$31 billion target for 2022. It also expects to exceed a target to reduce risk-weighted assets by US$100 billion.

The bank’s earnings in Asia proved particularly resilient as the region largely escaped the worst ravages of coronavirus. China last week reported a strong rebound in growth, putting its economy on course to expand this year even as the economies of most other major countries shrink.

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