By Simon Clark and Quentin Webb
HSBC Holdings PLC, one of the world's largest banks, said it would pour about $6 billion of extra investment into Asia in the next five years, as it doubles down on its core business.
The London-based bank, which makes most of its profit in Hong Kong and mainland China, said Tuesday that earnings fell 35% to $3.9 billion last year as the coronavirus pandemic roiled the global economy. HSBC set aside $8.82 billion in provisions for bad loans last year versus less than $3 billion in 2019.
Chief Executive Noel Quinn is leading the reorganization of the bank. Geopolitical tension between China and Western countries has strained his ambition for the bank to be a financial bridge between the most populous nation and the rest of the world. HSBC last year supported China's imposition of a national security law in Hong Kong, which the U.S. and British governments opposed.
"We plan to focus on and invest in the areas in which we are strongest," Mr. Quinn said. In a presentation to investors, the bank said it would invest an additional $6 billion in its wealth-management and international wholesale businesses to drive growth in Asia. HBSC will also spend more to digitize faster and said it planned to build on its strengths in sustainable finance.
The bank reported a return on tangible equity of 3.1%, down from 8.4% a year earlier, and dropped its previous goal of reaching a 10% to 12% return on this basis by 2022. Instead, it will target a return of 10% or more in the medium term.
At the same time, HSBC said it may unload some retail operations. HSBC said it was "exploring organic and inorganic options" for its U.S. retail business and was in negotiations over a sale in France, which is likely to generate a loss if concluded.
HSBC, which has been considering disposing of its French retail bank since at least 2019, is in talks with private-equity firms about a sale, people familiar with the situation said. Its expansion into France was built on the 2000 purchase of Credit Commercial de France for $10.6 billion.
Founded in Hong Kong and Shanghai in 1865, HSBC expanded world-wide in the 1990s and early 2000s through costly takeovers, many of which it had to unwind. The bank took a big step into the U.S. in 2003 with the $16 billion takeover of subprime consumer lender Household International Inc., but the acquisition saddled the bank with billions of dollars of soured mortgages and lawsuits following the global financial crisis of 2008. HSBC sold its U.S. credit-card business to Capital One Financial Corp. in 2012.
The U.S. expansion brought more trouble for HSBC when the Justice Department accused it of laundering proceeds from drug trafficking in Mexico and stripping data from transactions involving sanctioned nations like Iran to avoid detection. The bank paid a then-record $1.9 billion in 2012 to settle the allegations. HSBC admitted wrongdoing but avoided a guilty plea or prosecutions of its executives.
In the U.K., meanwhile, HSBC faces uncertainty caused by the country's departure from the European Union.
HSBC's London-listed shares lost more than a third of their value in 2020 but have risen 14% in the year through Monday. On Tuesday in Hong Kong, its shares jumped more than 4% in early afternoon trading.
HSBC said it would pay a dividend of 15 cents a share, following an earlier indication it would make a conservative payout if circumstances allowed. It had put dividend payments on hold to comply with British regulatory demands, angering some shareholders in Hong Kong. The Bank of England's Prudential Regulatory Authority lifted the ban on U.K. banks paying dividends in December.
Write to Simon Clark at firstname.lastname@example.org and Quentin Webb at email@example.com
(END) Dow Jones Newswires
February 23, 2021 00:59 ET (05:59 GMT)Copyright (c) 2021 Dow Jones & Company, Inc.