(Updated with commentary on Ping An’s proposal, stock market price, context)
SINGAPORE, Aug 1 (Reuters) – HSBC on Monday turned down a proposal by Chinese group Ping An, its largest shareholder, to spin off its Asian operations, a deal Europe’s biggest bank said would be costly, as the banking establishment has just announced profits above expectations in the first half.
This is HSBC’s most direct response since Ping An’s proposal to split the bank’s Asian operations made last April.
In a sign of growing confidence in its ability to improve profitability despite global economic uncertainties, HSBC on Monday raised its short-term return on tangible equity target to at least 12% from 2023.
The bank cites lower costs, a 4% rise in adjusted earnings and a net interest margin also improving, as higher central bank rates improve loan yields.
The bank said it will pay an interim dividend of 9 cents per share and intends to return to paying quarterly dividends beginning in early 2023. It also said share buybacks remain low. likely this year.
The title gained 6.6% on the London Stock Exchange at 1420 GMT.
“We feel sympathy for Ping An and all of our shareholders because our performance has not lived up to our expectations over the past ten years,” chief executive Noel Quinn told analysts.
HSBC said Asia’s share of earnings rose to 69% in the first half from 64% a year ago.
According to the bank, such a split would mean a potential long-term impact on its credit rating, tax bill and operating costs, and pose immediate risks in the execution of any split or merger.
Ping An, who has not publicly confirmed or commented on the proposed split, owns about 8.3% of HSBC’s capital.
A spokesman for the Chinese investor declined to comment on HSBC’s results and its strategy.
PROFIT ABOVE EXPECTATIONS
The London-based bank on Monday reported pre-tax profit of $9.2 billion (8.99 billion euros) for the six months to June 30, down from $10.84 billion. dollars recorded a year ago, but higher than the average forecast of $8.15 billion compiled by HSBC from analyst data.
“The combination of rising interest rates – and therefore improving net interest margins – along with cost control and low expectations means that HSBC’s second quarter results are pleasing to investors,” said Russ Mould, Chief Investment Officer of AJ Bell.
According to Noel Quinn, the improved profitability forecasts represent the group’s best returns for a decade and validate its international strategy.
The bank announced a $1.1 billion charge for expected credit losses as heightened economic uncertainty and rising inflation put more of its borrowers in trouble. (Report Anshuman Daga and Lawrence White, French version Augustin Turpin and Diana Mandiá, edited by Matthieu Protard and Kate Entringer)