HSBC Unveils Long-term Profitability Strategy

HSBC has lowered its long-term profitability target on Tuesday and unveiled a revised strategy focused mainly on wealth management in Asia.

Referring to the low interest rate environment and tough market conditions, HSBC has abandoned its goal of achieving a return on tangible equity of 10 to 12%, and said instead it will aim for 10% over the medium term.

"The big structural shift that’s gone on since we set out the plan last February has really been the shift in interest rates down toward zero in most markets that we do business in. If interest rates were 100 basis points higher today across the board it would improve our returns by 3 percentage points.”, Ewen Stevenson - HSBC's CFO commented.

The bank said it would pay a dividend of $0.15 a share in cash, the first payout announced since October 2019, but said it would stop the previous practice of paying a quarterly dividend, and target a payout ratio of between 40% and 55% of reported earnings per ordinary share from 2022 onwards (well below recent years).

The announcement came as HSBC reported profit before tax of $8.78 billion for 2020, down 34% from a year earlier. HSBC's shares fell 2% in London.

HSBC additionally commented that its growth in Asia for the next five years will be driven by around $6 billion of additional investment in its wealth management and international wholesale business. 

Profit from the bank's wealth management and personal banking division in Asia was $5 billion in 2020, with Hong Kong accounting for almost all of it, despite its controversial decision to assist Hong Kong police with investigations into pro-democracy activists.

Profit from the bank's wealth management and personal banking division in Asia was $5 billion in 2020, but its cash cow Hong Kong accounted for almost all of this.

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