FINANCIAL SERVICES | Staff Reporter, Hong Kong

HSBC's profit up 82% amidst expected credit losses

Its net profit for the quarter amounted to $35.7b (US$4.6b).

HSBC Holdings reported its net profit rose 82% to $35.7b ($4.6b) in the first quarter of the year, when compared to the same quarter last year.

“We had a good start to the year in support of our customers, while achieving materially enhanced returns for our shareholders. I am pleased with our revenue and cost performance, but particularly with our significantly lower expected credit losses,” Group CEO Noel Quinn said.

In its Q1 earnings report, HSBC noted it posted profit in all regions, during the quarter, particularly in HSBC UK Bank plc which reported a pre-tax profit of more than $7.76b (US$1b) during the quarter.

Reported revenue was down 5% to $100.9b (US$13b) due to the impact of interest rate reductions in global businesses last year, offset by market impacts in life insurance manufacturing and valuations in Global Banking and Markets.

“Global Banking and Markets had a good quarter, and we saw solid business growth in strategic areas, including Asia Wealth and trade finance, and mortgages in Hong Kong and the UK. We also strengthened our lending pipelines in our retail and wholesale businesses,” Quinn also said.

Moreover, the banks net expected credit loss were a release of $3.1b (US$400m), compared with $23.2b ($3b) in the first quarter of 2020. The bank noted its first quarter results in 2021 was “favourably impacted by net ECL releases,” that reflected improved economic forecasts.

The group expects its ECL charge for the year to be below medium-term range of 30-40 basis points of average loans indicated in their 2020 annual results.

HSBC’s reported operating expenses increased 9% from higher restructuring and other related costs from transformation programme and increased investment in technology; whilst lending increased by $15.5b ($2b) on a reported basis and $46.5 (US$6b) on a constant currency basis in the quarter.

Leding growth was seen in wealth and personal banking, largely in mortgages in the UK and Hong Kong, and in commercial banking.

Further, the group expects mid-single-digit percentage growth in customer lending in 2021.

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